As an Uber driver you are putting thousands of miles on your vehicle. Since Uber doesn’t reimburse you for your vehicle expenses, the cost of driving can quickly add up and greatly reduce your take-home income. Then the government hits you with self-employment taxes that can be upwards of 36% of what Uber 1099’s you.
Fortunately, there are deductions available to Uber drivers that will help lower your tax bill and ensure you keep more of that hard-earned cash. Namely, the vehicle mileage deduction.
Before you jot down some random percentage of miles for your accountant, here are five things you need to consider.
IRS Requires a Mileage Log To Claim Vehicle Expenses/Deduction
Back in ancient days, that meant a paper log. Fortunately, there are all sorts of technology that automate this process.
Every log requires the following details for every single trip:
- End Address / Destination
- Miles Driven
- Business Purpose
Don’t skip this process! If you get audited, the IRS will allow you to “re-create” your log, but will only allow trips you can substantiate with evidence (like business receipts, or service records).
You will lose out on hundreds, even thousands, of dollars from miles they disallow. Those are miles you actually drove. Add in the time it takes to comb through your records to generate a log after-the-fact, and you can see why tracking technology is so popular now.
One of our clients, an attorney, got audited. It took over 3 months for him to regenerate his mileage log. Don’t let this happen to you!
Deducting Miles is worth more than Claiming Actual Expenses
Unless you are driving a Porsche, of course. But in that case, what are you doing driving it for Uber? The current IRS rate for 2017 is $0.535 per mile. If you drive 2,000 miles per month, that is a $12,840 deduction!
Why? To prove what % of your driving was for business. You can only claim the % you can back up with driving records.
Mileage Tracking Apps Cost Uber Drivers Thousands!
The top mileage tracking apps are only 90-95% accurate. Yes, they’ll record your trips, but they under report the actual miles. This is because of how mileage tracking apps work.
Because they run off your phone, they cannot capture enough data to make your log 100% accurate. For the 2,000 mile p/m driver, that app just cost you $642 off your deduction!
The Mileage Ace is your mileage tracker alternative. At nearly 100% accuracy to your odometer, it’ll generate the biggest deduction for you automatically.
Not all miles are deductible.
Only Business to Business trips can be deducted.
Leaving your home to pick up your first Uber PAX is not deductible (unless you have a home office – which is worth looking into). The same goes for dropping off that last fare and coming home.
But you can…
Minimize those commute miles.
Any trip with one endpoint being a personal location is a personal trip. So if you have to travel 30 miles to the city where you will be doing the Uber driving – that 30 miles isn’t claimable… kind of.
There are some slick ways to claim commuting miles. For example, make a business pit stop close to home. A local car wash, a gas station to fill up. Use your imagination – but make sure it’s legitimate business. Find something that has a genuine business purpose, and viola, those commuting miles aren’t for a commute any more – they’re a business trip!
As a self-employed Uber driver, there are many tools to help you make your new career profitable. People who use mileage tracking devices, like the Mileage Ace, are more likely to maximize their deduction. If you’d like to read more about the true cost of mileage tracking apps, follow this link.
You should always consult your tax professional before making any decision about your taxes.