Working in shared economy marketplaces like DoorDash, Lyft, or Uber has certain advantages for earning extra income. Some people even make a decent living at it.
If you are working in a gig economy, it’s important to remember that these companies don’t withhold taxes from the money you earn, but that doesn’t mean you’re off the hook from paying them. To avoid owing tax at the end of the year, we recommend you pay estimated taxes throughout the year. Alternatively, you could have additional tax deducted from your salary at your day job. The estimated tax calculation can get a little tricky, so just give us a call and we’ll help you out.
It’s also important that you track how many miles you drive. For 2019, you can deduct 58 cents for every mile you drive your car for business purposes. Every 1,000 miles you drive for Uber or DoorDash amounts to a $580 deduction.
The only way you’ll know how many miles you drive is if you keep track of them using a mileage log, either on paper or via a smartphone app. Also, take a picture of your odometer reading on January 1 and December 31. This helps you track how many total miles you drive for the year.
Also track your out-of-pocket expenses. You might offer bottles of water to your passengers, or gift baskets to your Airbnb guests. You can deduct these out-of-pocket expenses on your tax return. Examples of other deductible business-related expenses include:
- Hands-free smartphone mounts for the car
- Smart phone and monthly service
- Parking, bridge tolls, and road tolls
- Linens and soaps utilized by Airbnb guests
- Security cameras and home protection services
- Commissions and fees paid to Uber, Lyft, Airbnb and other networks
- If you’ve purchased any big-ticket items, remember to tell us about them. Maybe you replaced the roof or installed a solar panel in your Airbnb home. Or perhaps you installed a video security system in your Uber car. We can help you decide if these are expenses that need to be spread out over several years through depreciation, or if you can deduct some or all of them right away.
In addition to mileage logs and expense records, keep your 1099 forms and other tax documents. Gig economy companies report income paid to you on a Form 1099. Some companies will send you Form 1099-MISC, while others will send you a Form 1099-K. Some might even send you both, or none at all. The important thing is to keep copies of any tax documents and all the income you earn.
Send us copies of the year-end reports and statements you receive. Uber and Lyft, for example, detail their fees and provide an estimate of your mileage on their year-end reports.