Working as a rideshare or delivery driver has a lot of advantages. You get to set your own schedule, adjust your work hours based on how much you want to make, and never have to deal with mean bosses or unpleasant coworkers. It can feel like a dream job if you’ve never had the freedom that self-employment brings.
With this great freedom, however, comes a new set of responsibilities. You have to worry about things like managing your operating costs, providing top customer service, setting up your own retirement plan, and paying your self-employment taxes. We’ve written about self-employment taxes in the past, but in this guide, we want to focus on a crucial method for reducing your business taxes.
It involves tracking how many miles you drive for Uber, Lyft, Postmates, or whatever other platform you use. This way, you can report the mileage at tax time, claim the mileage deduction, and reduce the amount of money you owe the IRS. We’re going to show you why it’s important to track your mileage, how to do it, and five apps you can use to make mileage tracking easy.
- Why You Need to Track Your Mileage
- How to Choose a Mileage Tracking App
- 5 Mileage Tracker Apps to Use
- Mileage Tracking FAQ
If you’re a new rideshare driver or delivery driver, you may have never thought about keeping track of how many miles you drive. Aside from an occasional glance at the odometer to see if you’re due for an oil change, most people don’t pay much attention to how many miles they drive on a daily basis.
As an Uber driver, Lyft driver, or anyone else who drives for business, you absolutely should keep track of the number of miles you drive. This is because all drivers for these platforms are independent contractors.
As an independent contractor, the company you work for does not reimburse you for using your personal vehicle. All the money you spend on gas, maintenance, car payments, and insurance comes out of your own pocket. This can cause a financial sting when you’re first getting used to it, but there is a silver lining.
Although you don’t get reimbursed for the miles you drive, the Internal Revenue Service does allow you to write your driving costs off as a business expense. There are two ways you can do this. The first is called the actual expense method. With this approach, you keep detailed records of all the expenses you incur while driving your car for business use. Qualified deductible costs include the following:
- Registration fees
- Depreciation (or lease payments)
As a rideshare or other independent contractor driver, there are some problems with this method. The main issue is that, since you’re using your personal vehicle, it’s difficult to say what percentage of the above expenses come from driving your car for business use vs. driving it for personal use.
For instance, let’s say that you drive for Uber a few hours after work each day to earn extra money. Doing this obviously increases the amount of gas you use and the frequency with which you have to get oil changes.
However, since you also use your car to commute to your day job, run errands, and even take the occasional vacation, it’s difficult to say what percentage of your driving car expenses come from driving for Uber.
It is possible to figure it out, but it requires very detailed record keeping and possibly precise instruments to measure exactly how many gallons of gas you use during an Uber shift. Even then, you run the risk of making a mistake (something you never want to do when preparing your tax return).
Recognizing the complexity of keeping track of your actual costs when using your vehicle, the IRS has another method you can use. It’s called the standard mileage rate, and it makes things a lot simpler. Instead of having to keep track of dozens of expenses, you only have to track the number of miles you drive.
To get your deduction, you just multiply the number of business miles you drove by the IRS standard mileage rate. Specifically, you want to use the business standard mileage rate. For the 2018 tax year, the business mileage rate is 54.5 cents per mile.
You can find a complete, up-to-date list of all the standard mileage rates on IRS.gov. It includes information on the rates not only for business travel expenses, but also the charitable rate, medical rate, and moving expense rate.
If discussions of standard deductions, depreciation methods, mileage tracking, IRS mileage rates, and business expense tracking makes your head spin, don’t worry. You don’t have to be a math genius, tax lawyer, or accountant to track mileage like a professional.
Recognizing that small business owners like you have more important things to worry about, a number of companies have created mileage tracking apps to make tracking mileage nearly automatic. These apps will generate a mileage report that you can refer to at tax time (or just pass along to your accountant if you prefer).
To track your mileage, all you really need is a smartphone and the right mileage tracking app. If you’re doing any kind of gig work that involves driving, you already have the smartphone. So the next issue is choosing the app for the job. We’ll get into some specific recommendations in a moment, but let’s first look at some general features to look for when choosing a mileage tracker.
First, you want something that doesn’t use lots of battery power and doesn’t take up excessive space on your phone. To track your mileage, the app will need to use your phone’s locations services and GPS function. This will require some battery power, but ideally not too much (since ridesharing and navigation apps already have high levels of battery usage).
Next, you want an app that’s easy to use. This seems like an obvious consideration, but it’s easy to get sucked in by advanced features and detailed reports, only to find yourself fiddling with dozens of options just to get the app started at the beginning of your shift. Any time you spend trying to get the app is (unpaid) time you could be spending earning money, so picking an app that’s easy to use is critical not just for your sanity but also for your profitability.
Finally, you want to choose an app that provides accurate, IRS-compliant data. In theory, tracking mileage using an app is simple. The app just gets your location using GPS and then recognizes that you’re moving based on your changing GPS location. From there, it’s simply a matter of converting that into miles.
Navigation apps have been doing this since the days of dashboard-mounted GPS units, but some apps still accomplish it better than others. A good test is to set your car’s trip odometer, turn on the app, and then drive a short distance.
Compare the app’s mileage to your odomoter’s to determine accuracy. There might be very minor variation (fractions of a mile if your app is that accurate), but there shouldn’t be any large differences. If there are, get a different app (or have a mechanic examine your odometer).
But which app should you use? In the next section, we’ll take a look at some of the best options out there.
You may have read up to this point and are thinking, “Okay, great, but can you just tell me which app I should use?” We understand. In fact, we wrote an entire guide to the best mileage tracking apps available. Consult that guide if you want detailed reviews of each app out there.
For the purposes of this article, we’ve narrowed our original list of ten apps down to our top five, and we’ve included only the essential facts about each. This way, you can spend less time reading about mileage tracking apps and more time earning money.
Unless otherwise noted, all the apps in this section are available for both Android and iPhone.
SherpaShare is not just a mileage tracking app. It bills itself as the “ultimate rideshare driver assistant,” including financial management tools, exclusive discounts, and help finding the most lucrative locations to drive.
SherpaShare features automatic mileage tracking. Once you’ve enabled the app, it will run in the background and automatically track miles each time you drive. All you have to do is review your mileage log and categorize each trip as either “Business” or “Personal.”
The only downside to SherpaShare is that it doesn’t have a free version. The app costs $5.99 per month, though you can try it out free for two weeks to see if it’s right for you.
The next mileage app on our list is TripLog. It’s both a mileage tracker and expense tracking tool. It’s meant for both independent contractors like you and for employees who need to track their mileage expenses so that their employer can reimburse them.
The basic version of TripLog is free. It allows you to track an unlimited number of trips, calculate fuel economy, and even track other expenses.
The only downside to the free version is that it does not include automatic mileage tracking. You have to manually enable the tracking feature and remember to turn it off at the end of your shift. To get automatic mileage tracking using Bluetooth, you have to pay $2 per month.
Next on our list we have Everlance. It’s an automatic mileage and auto-expense tracking app. It keeps things simple, focusing primarily on mileage tracking. If all you need is a mileage tracking app then it’s the one to get.
Everlance is free to download, though the free version does come with some restrictions. The main restriction is that you can only automatically track 30 trips per month. After that, you have to manually track them.
For most drivers, this will not be very useful, since you likely take more than 30 trips per month just in the course of your everyday driving (let alone when using your car for business purposes). To get unlimited mileage tracking, you’ll need to upgrade to the Premium version for $8 per month.
Hurdlr is a business expense tracker and mileage tracking tool. Okay, but so are all the other apps on this list. What makes Hurdlr special? It has useful features for real estate agents, Airbnb hosts, and self-employed entrepreneurs, but you probably don’t care about that.
The main thing that sets it apart is its ability to integrate with your Uber, Lyft, Postmates, Instacart, Lyft, Handy Cleaners, and Uber Eats accounts. It can pull your income data from each and show you tax estimates. This tax calculator feature is something that other apps just can’t match.
On top of all this, Hurdlr is free. That being said, the free version does lack some helpful features like automatic mileage tracking. To get the auto-track function (along with other features like speed tagging and real-time calculations for state and self-employment taxes), you’ll need to pay $7.99 per month for the Premium version.
The final pick on our list is MileIQ (formerly “Mileage IQ”). Microsoft owns the app, and it comes included free with Office 365 Business Premium subscriptions. Since you’re an independent contractor, however, that probably isn’t too useful to you.
The app does have a free version, however, and it allows automatic mileage tracking like the other apps we’ve discussed so far. It also lets you sort between “Business Drives” and “Personal Drives.” The free version of MileIQ limits the number of trips you can automatically track to 40 per month.
This is better than the 30 per month that the free version of Everlance offers, but it’s still not going to be enough for frequent rideshare or delivery drivers. To get unlimited automatic mileage logging, you’ll need to pay $5.99 per month for the Premium version.
To conclude this guide, let’s address some common questions about mileage tracking and mileage tracking apps.
1. Do I need to separately track my miles for Uber and Lyft?
No, there’s really no need to do this. From the perspective of the IRS, all your independent contractor jobs and income streams fall under the “umbrella” of one business. All your mileage expenses, then, apply to your self-employment taxes, and there’s no need to track them as if they were for separate businesses.
2. Is the cost of my mileage tracking app tax deductible?
Most likely, yes. The cost of software or apps that you use for your business is a deductible business expense. Of course, you should always consult an accountant just to be certain (we’re not accountants or tax lawyers, so we cannot offer you any tax or other legal advice).
3. Does using a mileage tracking app protect me from an IRS audit?
There is no way to guarantee protection against an audit, but using a mileage tracking app and keeping detailed records will help decrease the chance that the IRS audits you because of a suspicious-looking return. And if you do get audited, the detailed records in the mileage tracking app will help you prove that all your deductions comply with tax law.
4. What is the modified accelerated cost recovery system (MACRS)?
The modified accelerated cost recovery system (MACRS) is the system that U.S. tax law uses to calculate the annual deductions for depreciation of an asset (car, house, computer equipment, etc.).
Generally, this is not relevant to you when deducting driving expenses unless you’re using the actual expense method. We highly recommend you use the standard mileage rate instead, but you can learn more about MACRS and the actual expense method here.
5. What is a fixed and variable rate (FAVR) plan?
A fixed and variable rate (FAVR) plan is a common method that employers use to determine the reimbursement rate for employees who use their personal vehicles for business purposes. Because gig economy drivers are independent contractors, the FAVR plan isn’t relevant to you.
The only thing you need to know is that independent contractors do not receive mileage reimbursements of this sort (for most common rideshare and gig apps). This is why it’s so important to track your mileage and claim the mileage deduction when filing your taxes. Since you’re not getting reimbursed, you might as well at least pay lower taxes in exchange for your out-of-pocket expenses.
Track Your Miles to Lower Your Tax Bill Today
The language surrounding mileage tracking and the mileage deduction can be complicated, sometimes to the point that it doesn’t even seem like it’s written in English.
With the right mileage tracking app, however, you don’t have to worry about the technical jargon and subtleties of the tax calculations. All you have to do is drive, classify your trips, and then hand the expense report to your accountant to square away at tax time. Instead of the dreaded feeling of filing your taxes, you get to have the amazing feeling of saving money.
To learn more about how to get your maximum tax deductions, check out our guide to tax deductions for Uber and Lyft drivers. For an overview of the tax filing process as a gig economy worker, check out our guide to self-employment taxes.