With so many people jumping into the self-employed ridesharing waters, plenty of folks have questions about how to handle their tax returns each year. Most drivers understand they have to track and report their business mileage, but fewer understand how to truly maximize their deductions by calculating the actual costs of their vehicle expenses year over year.
Here’s a checklist of must-have information to cover all the bases for both standard mileage deductions and actual auto deductions come tax season.
As we’ve discussed in previous articles, all self-employed drivers are responsible for logging their business trip mileage. Make sure you have, at the minimum, the following information in each of your logs:
While this is a good starting point for the up-and- coming Uber driver hoping to minimize his tax liability or increase his refund, mileage isn’t the only thing that can be written off. As most self-employed drivers use their personal vehicles for work, many vehicle expenses and costs can be written off as well.
Those who are meticulous about tracking each of their auto expenses may find that their available tax deductions far exceed what is offered by the IRS standard rate (set at 53.5c per mile in 2017). This is known as the “actual expense” method of deduction. Keep these costs and considerations in mind as you log your business mileage:
This next batch can be written off when using the standard mileage rates as well.
And to top it all off, you’ll need a defensible system of regular mileage reporting, such as a smartphone app. The IRS doesn’t appreciate drivers who try to produce a years’ worth of reports all at once near tax time. For a simple and smooth tax write-off, log each of these expenses as they occur, such as with MileageLog.
It’s also important to note that the actual expenses method of deduction won’t necessarily produce a stronger return. The IRS standard rate can be considered the “average” of all these variables; the unique circumstances of your own job and vehicle will determine your most advantageous option when filing your return. However, drivers hoping to maximize their returns must track and record their actual car expenses if they hope to see how it stacks up to the standard mileage rate offered by the IRS.