Are you worried about how to handle your Lyft taxes?
Reporting your income as a Lyft driver might seem intimidating.
If you’ve never worked as an independent contractor before, don’t worry.
Filing your Lyft taxes isn’t as difficult as it might seem.
In this article, you’ll learn everything you need to know about reporting income.
You’ll also learn what’s involved in paying Lyft taxes on that income.
Table Of Contents
Key Concepts About Lyft Taxes
You need to understand three key concepts about paying taxes as a Lyft driver:
- You’re responsible for sending tax payments to your state and the IRS
- Your work as a Lyft driver classifies you as an independent contractor
- You must file a tax return so you report an income figure that matches what Lyft tells the IRS it paid you
Let’s explore these concepts in more detail.
Do You Pay Taxes on Lyft Income?
Yes, you must pay taxes on the money you make driving for Lyft.
Lyft doesn’t take taxes out of your pay like you’re probably used to at current or past jobs.
Jobs where they classify you as an employee usually handle taxes for you.
Employees receive a W-2 tax form to use when filing a tax return.
Independent contractors receive what’s called a 1099 tax form.
Most likely, you’ll get a 1099-K form and a 1099-NEC form from Lyft.
Companies draw taxes from an employee’s pay based on how many exemptions those employees listed on their W-2 paperwork.
Employers don’t take any taxes out from independent contractors who receive 1099 forms.
This means you’re responsible for setting aside enough money to pay taxes on your Lyft driving income.
There Is a Threshold for Filing Lyft Taxes
Lyft doesn’t create and send a 1099 to every Lyft driver.
In most states, you’ll receive a form 1099-K if you made at least $20,000 from ride payments and gave at least 200 rides during the year.
These four states work differently:
- Illinois: You’ll get a 1099-K if you earned $1,000 or more in ride payments.
- Virginia, Massachusetts, and Vermont: You’ll receive your 1099-K after earning $600 or more from giving rides to passengers.
In all states, the 1099-NEC tax form goes out to you if you earned $600 or more from income other than giving rides.
These earnings might include bonuses paid to you by Lyft, for instance.
Why Filing Lyft Taxes is Essential
Lyft reports all of your income to the IRS and your state tax agency.
Tax agencies will come after you for the taxes owed if you don’t disclose that income by filing a tax return.
They know how much you earned because Lyft tells them the figure.
Drivers Are Independent Contractors
You need to understand the difference between an employee and an independent contractor.
As an employee, you get what’s called net pay in your paycheck.
You get what’s left after your employer deducts things like state taxes, Medicare taxes, Social Security, and other taxes from your gross pay.
If you selected the correct exemptions, you should typically owe $0 or get a refund back when filing your tax return each April.
As an independent contractor, your 1099 forms report your gross income.
Don’t forget that the Lyft payout you take each week represents this gross income.
You need to set aside some tax money from those payouts.
You don’t want to end up with a huge tax bill on your April tax filing.
On your 1040 tax form, you’ll attach a Schedule C to report Lyft income.
Talk to a CPA to Cover Bases
Your best bet is to seek out a CPA (certified public accountant) to help you do everything correctly with your Lyft taxes.
An accountant can help you estimate how much to safely set aside for taxes.
Getting help from a tax expert makes sense for most drivers.
How Much Do Lyft Drivers Pay in Taxes?
You’ll pay a percentage of your gross Lyft pay based on your overall tax bracket and your state agency’s tax percentage.
Self-Employment Taxes
Independent contractors must pay self-employment taxes.
These taxes include making payments to the Medicare and Social Security systems.
You’ll pay self-employment taxes on top of your regular income taxes.
Quarterly Taxes
You’re required to pay self-employment taxes in four quarterly payments throughout the year instead of in one lump sum when filing your return.
These are the due dates:
- April 15
- June 15
- September 15
- January 15
Important Lyft Tax Documents
You’ll need a few documents to help you do your taxes.
Lyft Tax Document List
Your main Lyft tax documents are:
- Annual Summary
- 1099-K
- 1099-NES
The Annual Summary shows you the following:
- Earnings
- Expenses
- Total rides given
- Total online business miles
Your ride payments section shows you how much Lyft passengers paid you and includes ride payments, cancellation fees, toll reimbursements, tips, and Lyft platform fees.
A non-ride earnings section shows streak and referral bonuses, personal power zones, and ride challenges.
The expenses section shows you what you paid for items such as third-party fees, service fees, Express Pay fees, tolls, and Lyft’s platform fees.
The 1099-K shows the amount riders paid you for rides in Box 1.
Again, this represents the gross self-employment income you must pay taxes on.
The Box 1 section of the form 1099-NEC form shows any payments received that didn’t relate to passenger payments, such as your streak or referral bonuses.
Where to Find These Forms in Your Account
All tax forms sit in your Driver Dashboard area.
Log in and look for “Tax Information.”
Lyft Tax Deductions for Drivers
Does it sound a little scary to pay taxes on the income Lyft pays you?
Don’t worry because the IRS gives you some relief in this area.
It’s called “deductions.”
You can deduct some of your business expenses from the gross income reported by Lyft.
The IRS and your state will only tax you on the amount that’s left after deducting those expenses from the amount on your 1099 forms.
You can deduct the following expenses from your Lyft income.
1. Mileage
The IRS proves something called the standard mileage rate deduction to self-employed people.
The only catch about deducting mileage this way is that you can’t deduct the other expenses below.
It’s an “either/or” situation. Either deduct your mileage from income or all the other expenses from income.
That’s why it’s important to keep meticulous records on mileage driven, as well as all of your other expenses.
You won’t know which method can save you the most on taxes unless you have all the information at tax time.
The only other expenses you can deduct when choosing the standard mileage rate deduction are Lyft-related parking fees and tolls.
2. Vehicle Expenses
You can deduct the following car expenses:
- Lease payments
- Car insurance
- Gas
- Vehicle registration fees
- Maintenance and repairs (tire rotations, oil changes, and other repairs)
- Car washes
- Depreciation
- Smartphone and Phone Service
You’re required to obtain a smartphone to work for Lyft.
That makes this equipment a deductible expense on your Lyft tax return.
This includes any money spent on your monthly cell phone bill and the cost to purchase your smartphone.
Keep in mind that the IRS only allows you to deduct expenses related to your use of the phone while working inside your Lyft business.
Separate personal phone use and expenses from business use.
Doing so will help you deduct the proper amount on your return.
One way to get accurate information is to look at an itemized phone bill from your smartphone carrier.
Break down usage based on the hours worked with Lyft.
3. Equipment
Self-employed independent contractors can deduct any equipment used during the operations of their businesses.
For a Lyft rideshare driver, your equipment relates to your vehicle and smartphone.
Unless you choose the standard mileage rate deduction, you’ll deduct equipment expenses such as your car repairs and phone.
4. Insurance
If you don’t select the standard mileage rate deduction, you can deduct your Lyft insurance expense from your 1099 income.
5. Parking and Tolls
You can deduct anything you paid toward tolls and parking fees while driving for Lyft.
Again, you can still deduct these expenses even after choosing to use the standard mileage rate deduction.
Ways to File Lyft Taxes
You can use an accountant to file your tax return or you can do it on your own.
1. CPA (Our Suggestion)
We recommend using an accountant so that you know mistakes don’t exist on your tax return.
You should at least do this the first time and learn the ropes by talking through your situation with your CPA of choice.
2. TurboTax
If you’d like to do your tax return by yourself, you can use TurboTax to do so.
Lyft partners with TurboTax.
This means you can get the TurboTax Self-Employed product for free because of your affiliation with Lyft.
You can also get TurboTax Live Self-Employed for half-price if you want the extra feature that connects you with free tax advice from tax professionals.
Note that Lyft could always revoke this feature.
Contact Lyft customer service if you have any questions about the availability of the TurboTax bonus for next year’s tax return.
Frequently Asked Questions
Does Lyft Report Income to the IRS?
Yes, Lyft reports everything they place on your 1099 forms to the IRS.
There’s no way to avoid the IRS or your state agencies from finding out how much you earn through the Lyft app.
That’s why you need to report accurate numbers on your tax return.
Your state and the IRS check what you report against what’s reflected on those 1099 forms.
Can I Report Lyft income Without a 1099?
Yes, you can report your Lyft income without 1099 forms.
You should do this if you can’t access the 1099 forms for any reason.
Your Annual Report shows you everything you need in terms of income and expenses.
Use that when filing your tax return.
What if I Didn’t Receive a 1099 from Lyft?
You can log into your Lyft Dashboard to retrieve your 1099 forms.
Even with a deactivated account, Lyft allows you into the Dashboard to get tax forms.
The app might not work for this so log in using the web browser version.
If all else fails, you can contact the IRS for help retrieving your tax forms.
Wrapping Up
Do you feel a little less anxiety about handling your Lyft taxes? As you now know, plenty of help exists to make sure you file correctly and with the proper income amounts.
Make sure you keep track of all expenses and consider using a CPA or TurboTax. Pay your tax payments quarterly. File on time each April, and you shouldn’t have any problems.
