Deductions & credits

If your mileage is your only deduction, you may be right.  However, there are other deductions you may be entitled to that you may not be considering.   I have included some information for your review prior to making your decision.

Being an independent contractor means that you're self-employed . As far as the ride-share company is concerned, you're the owner of a separate business that it uses to provide driving services. So when you receive a payment, understand that it's not a traditional "paycheck," and likely no taxes have been taken out.

It's up to you to take care of federal and state income taxes, as well as Social Security and Medicare. Combined, these taxes can easily reach 30% to 50% of your income, so make sure to set aside money to pay them.

If you're accepting ride-sharing fares more than occasionally, you may be required to file quarterly estimated income taxes. At tax-filing season each spring, you'll be reporting your self-employment income and expenses on Schedule C, as well as filling out Schedule SE for self-employment tax if your net income from the work is greater than $400.

 Tax deductions for your car

Since you're an independent business owner, just about any money you spend on your gig as a ride-share driver will be a tax-deductible business expense. The first thing that probably comes to mind is your car. There are two ways to take a deduction for the business use of your car:

• Deduct the actual expenses of operating the vehicle for business, including gas, oil, repairs, insurance, maintenance and depreciation or lease payments.
• Take the standard IRS mileage deduction. As of 2016, the rate is 54 cents per mile driven for business use.

If you use your car for both ride-sharing and personal transportation, you can deduct only the portion of your expenses that apply to the business use. And whichever type of deduction you claim, it's critical that you keep thorough records. The IRS could disallow any tax deductions you can't support with:

• Receipts
• Mileage logs
• Any other documentation

Other tax deductions for ride-share drivers

Commissions you pay to the ride-share company are a business expense, as is any cost you may have to pay for technology installed in your car. Other tax deductions include:

• Water, gum or snacks for passengers
• Tolls and parking fees

In addition, ride-sharing companies typically require use of a smartphone.

• The portion of your mobile phone expenses attributable to your ride-share work can be used to reduce your self-employment income.
• For simplicity's sake, it may make sense to have a dedicated phone for work.

Making sense of your 1099 forms

As a contractor, you won't get a W-2 form from your ride-share operator, but you likely will receive one or more 1099 forms. Ride-share companies generally distribute these forms according to the same criteria:

• Payments for processing you customers' payments are reported on Form 1099-K. The amount shown in Box 1a of this form is all the money that the ride-share operator collected from customers for rides that you provided.
• This will be more than you actually received in payment, since it includes the ride-share company's commissions and other expenses. Your ride-share operator will provide you a tax summary you can use to translate the 1099-K information into some of the income and expenses to report on Schedule C.
• Payments for other activities, such as referrals or non-driving-related bonuses, are reported on Form 1099-MISC. This money is income to report on Schedule C.