How To Handle Taxes and Maximizing Your Deductions

All right. Without further ado, this is the most exciting video of the course, and that is how to maximize your taxes.

Now, it’s not that fun but it’s something you have to think about. You have to pay taxes. You are making, earning an income and the government gets a piece.

However, I would say if you do it right and if you’re in a lower tax bracket that I would assume many of us are, you’re going to turn out okay.

So let me teach you how to do it and avoid some of the common mistakes that can happen.

First of all, you want to get an app like this one. This is called Stride Drive. Stride Drive is a really, really helpful app and what’s really sweet about it is that it’s free. The other most popular one is called MileIQ and there’s plenty of other ones out there in the market.

And by the time you are watching this video, there may be even better ones. So do a little research, but this is the one I use. It’s free and it’s clean and I like it and it’s simple.

Now, remember because you are not an employee of Lyft, you technically don’t work for Lyft or Uber, you’re an independent contractor, they don’t give you benefits and they don’t deduct taxes or social security or Medicare or anything like that.

So if you ever worked a normal job, you fill out a W-2. And let’s say you’re getting paid $1,000 a week. However, because of other things, you may be getting $700 a week and it’s very frustrating.

And so it’s super cool that you get the entire amount and none of it is deducted. However, you need to keep track of all of it. That’s where MileIQ and Stride Drive really, really come in and they’re really helpful.

So a couple of things to keep in mind when you think about how much you’re going to pay for taxes. The typical wisdom is 28% to 40% you set aside.

So let’s just say 30% of whatever you can have set aside to pay your taxes. However, if you do it right, you’re going to probably pay a lot less. And if you have that 30%, then boom, that’s a little bonus for you to keep, whatever the difference is.

Something you have to keep in mind is what kind of tax bracket are you right now? For most of us, we’re going to be doing this part-time and not full-time.

And so think about all your other streams of income. In total, are you going to be over, you know…? It is right, you’re going to push into another tax bracket. And if that’s the case, you may see an increase in your taxes.

For many of us, we’re still going to be lower and so then it’s not going to hurt us at all. If you’re married, you have kids, you have to look at the tax bracket.

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Just Google tax brackets in the U.S. for this year and you can get a feel for how much, what percentage you’re paying. So if you’re wealthy and you’re doing this on the side, then you may see some significant taxes you need to set aside.

But I want to say most of the audience who is going to watch this video you’re actually not going to pay much taxes.

So as an independent contractor, if you earn more than $600, Lyft is going to send you a 1099K. They can also [send] you a 1099-MISC, which is if you are earning a certain amount of referrals or another kind of bonuses that are not driving-related.

Now, I’m going to send a link in the notes that you can look more clearly at the different tax stipulations. And it’s important to look at the links because this stuff changes all the time.

Now, you want to use Stride Drive and MileIQ primarily because you can keep track of all your expenses and how much you are spending and so what you can deduct. Now, at the end of the year, you can see a tax statement on Lyft and Uber and see how much you made, and that’s all handy there and set aside for you and you can calculate all your earning statements.

Now, when it comes to expenses, if you don’t calculate them and track every single one of them, you’re going to be missing out on a lot of savings.

So tax deductions. Let’s just talk about tax deductions. So right here you see I have $4,159 of tax deductions at this point. However, what does that mean?

Does that mean that I get $4,159 off my taxes? No, no, no. Let’s say I made… And I made more than this, but let’s say I made $5,000. If my tax deduction is $4,000, then I’m only going to be taxed only if I’ve made $1,000.

Remember, it’s tax deducting. It’s deducting off your total income, not what you pay for taxes. So please, please, keep that in mind. That is super important.

Now, tax deductions, according to the IRS, it’s just basically anything that is necessary to run a business. So let’s look at some of the different things you can do.

So if I press Add, I can look at Add an Expense. And let’s say I’m a delivery driver on the side. I can add $16 for a DoorDash, hot bags. And that’s the expense because I need that to run my business well.

Anytime you do a carwash, you can add it. Let’s say you do it to a $30 a month carwash pass. Boom. You can add that. I would also encourage you to keep another note for the things that are reoccurring that you can add.

Office supplies, passenger goodies. Okay. If you get some Jolly Ranchers or candy or whatever it is for people to have, you can tax deduct it.

Now, there’s this. So let’s say it’s $10. Usage for work. Is this something you’re going to be chowing down and you’re going to be giving to your kids?

Then you can’t claim and you need to be honest. You can’t claim that this is 100% for work. So you need to keep in mind what percentage are you using.

So if you’re going to do anything, like a music paid app, “Oh, hey, I’m using Pandora,” and you do a $10 thing but you only drive one hour a week, so let’s just be real.

You’re not using 100% for work. So you need it, be honest about those and keep track of those different factors. So you can track a lot of things. Look at all these different, amazing expenses you can do.

At the end of the year, you can go right here. “Send my tax report.” And you can look at your expenses and your mileage, and you can send your report straight to your email, and then you can send that to your CPA or you can use…TurboTax is what I use.

Let me address one final thing that’s super important. When it comes to driving, that’s going to be the number one tax deductible thing. Right now, as of now, the IRS has set apart 53.5 cents per mile, meaning…Let me just show you how that looks first.

And this is important for me to show. Let’s say I start driving right now. “Record a drive.” You see it says 53.5 cents per work mile. Wherever I drive, it will track it.

And at the end of it, I press Stop and Save. It will show me how much that’s tax deductible. I didn’t drive anywhere at that moment, so it didn’t show. So let’s see.

This is one I did the other day. I drove for 52 minutes and I drove 27 miles, so 27 times 53.5 is $14.89. So that can be a tax-deductible account. This is really good for me because I have killer gas mileage.

But if you do not have the gas mileage, let’s say you’re driving a van or you’re doing XL or UberXL or something like that or you just have the gas-guzzler and you’re getting 70 miles per gallon, maybe you should track it.

What that would require is that you’d keep all your receipts of all your gas and add them all up. And if you add them all up, you can actually turn out a lot better than this 53.5 cents a mile.

But for most of us, especially if you’re driving UberX and regular Lyft, you are going to turn out better for the 53.5%.

And here’s another thing. Let’s say you get a car and you have tons of expenses on your car. This 53.5% is including wear and tear. It’s including oil changes and so forth.

But let’s say you get a crazy big expense like you need new tires. You need new transmission gear and everything. It’s like $5,000. That happens. You get a lemon car. You’re putting down $5,000.

There’s no way what you’re driving 53.5 cents a mile is going to total that. So in that case, tracking everything is going to turn out for the biggest tax deductible.

So you have to play around with this. You’ve got to know…honestly, if you want to do it best, you want to track both. And at the end of the year, calculate which one turned out better and then you will maximize your tax return and perhaps pay little to nothing on taxes.

I hope this is helpful. And make sure you pay your taxes, and especially, track your tips because that’s when you get in big trouble for not claiming. All right. I hope this is helpful.

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