How Uber Drivers Can Save on Taxes

If you drive for Uber, Lyft, or any rideshare platform, you are running a small business. That means a long list of legitimate tax deductions. Most drivers claim only mileage and miss hundreds of dollars in additional savings. This guide walks through every deduction available, with rules for both the United States (IRS) and Canada (CRA).

Disclaimer: Tax rules change annually. Verify current rates with the IRS or CRA and consult a qualified tax professional before filing.

1. Mileage: Your Biggest Deduction

For most rideshare drivers, vehicle expenses are the single largest deduction. Every business mile you drive is deductible. This includes not just the time a passenger is in the car, but from the moment you turn on the app and start driving toward a pickup.

United States (IRS)

The IRS offers two methods. Choose your method in the first year you use the vehicle for business. You generally cannot switch afterward if you used accelerated depreciation.

• Standard mileage rate: Multiply total business miles by the IRS rate (67¢/mile for 2024; check irs.gov for the current year). This is the simplest method and works well for most drivers.
• Actual expenses method: Deduct the business-use percentage of all vehicle costs: fuel, insurance, oil changes, registration, repairs, and depreciation. More record-keeping, but can yield a larger deduction for high-mileage, high-cost vehicles.

What counts as business miles? Miles driven with the app on (whether or not a passenger is aboard), miles traveling to pick up a passenger, and miles traveling between rides in an active session.

Canada (CRA)

The CRA uses the actual-expenses method for self-employed individuals. Calculate your total business kilometres as a percentage of total kilometres driven in the year, then apply that percentage to all eligible vehicle expenses.

• Fuel, oil changes, maintenance and repairs
• Insurance premiums
• Registration and licensing fees
• Capital cost allowance (CCA) if you own the vehicle, or lease payments if you lease

Important for rideshare drivers in Canada: The CRA has ruled that rideshare services qualify as taxicab services. This means you must register for GST/HST immediately. The standard $30,000 small-supplier threshold does not apply. Uber and Lyft typically collect and remit HST on your behalf in most provinces, but confirm the arrangement with your platform.

2. Your Phone

Your smartphone is essential for rideshare work. You can deduct the business-use percentage of your monthly plan and, if you purchased the phone for work, the business-use portion of the device cost.

Track how much of your phone use is business-related. Many full-time rideshare drivers can claim 80–100% of their plan if it is used primarily for driving. Keep monthly bills as supporting documentation.

3. Car Cleaning and Maintenance

Keeping your car clean is a legitimate business expense for rideshare drivers. Car washes, interior cleaning, air fresheners, and detailing are all deductible to the extent the car is used for business. Keep receipts for every wash.

4. Passenger Amenities

Water bottles, phone chargers, mints, and small snacks provided to passengers are deductible business expenses. Keep a simple running log of what you spend each week, as these small amounts add up over a year.

5. Rideshare App Fees and Commissions

The service fees and commissions Uber and Lyft deduct from your fares are a business expense. Your platform will provide an annual tax summary showing total fees paid; this amount is fully deductible.

6. Parking and Tolls

Parking fees and toll charges incurred while driving for business are deductible. This includes parking while waiting for a ride in a designated area. Keep digital or paper receipts.

Note: Parking tickets and fines are not deductible.

7. Dash Camera

A dashboard camera is both a safety device and a deductible business expense. In the US, you may be able to deduct the full cost in the year of purchase under Section 179. In Canada, it is added to the appropriate CCA class. Deduct the business-use percentage if the vehicle is also used personally.

8. Seat Covers and Car Accessories

Seat covers, floor mats, and other accessories purchased specifically to maintain or improve your vehicle for rideshare purposes are deductible to the business-use percentage of the car.

9. Health Insurance Premiums (US Only)

Self-employed rideshare drivers in the US who are not eligible for coverage through a spouse's employer plan can deduct 100% of health insurance premiums for themselves and their family on Schedule 1 of Form 1040. This reduces your adjusted gross income, even if you don't itemize.

10. Self-Employment Tax Deduction (US Only)

You pay 15.3% self-employment tax as both employee and employer. The IRS allows you to deduct 50% of that SE tax on Schedule 1, which reduces your taxable income but not your SE tax bill itself.

Quarterly Estimated Tax Payments

United States

If you expect to owe $1,000 or more in taxes, pay quarterly: April 15, June 15, September 15, and January 15. Pay online at irs.gov/payments. Missing payments results in an underpayment penalty.

Canada

If you owe more than $3,000 in two consecutive years, the CRA requires quarterly instalment payments: March 15, June 15, September 15, and December 15.

The Key to Maximizing Deductions: Track Everything

The difference between drivers who maximize deductions and those who don't comes down to one habit: tracking in real time. TaxSort automatically logs your mileage via GPS and lets you snap receipts the moment you receive them, so every deductible expense is captured before it can be forgotten.

At tax time, export a complete summary for your accountant or tax software. Every trip, every wash, every phone bill. Organized and ready.