Disclaimer: I am not a tax accountant. This blog is intended for informational purposes only. And a guide to help organize your taxes. Please seek a professional tax account for specific advice. Links below to IRS sources.

Driving as an independent contractor for a rideshare or delivery company, you’re technically running your own very small business. So, you use tax deductions for driving expenses that can substantially lower your tax liabilities. However, you will need to accurately track all deductions and keep receipts in case the IRS chooses to audit your taxes.

Operating Expense Deductions

Operating expenses are costs associated with running your rideshare or delivery business (outside of vehicle costs).

You can also claim deductions for other expenses, such as winter floor mats, car tool kits, tire inflators and pressure gauges, portable batter jump packs, flashlights, mileage tracker apps, cooler bags, and business taxes and licenses.

Vehicle Expenses

Vehicle expenses are costs associated with owning and operating your vehicle.

—>| You must CHOOSE between Standard Milage and Actual Expense METHODS

Option 1 - Standard Mileage Method

To use the Standard Mileage deduction method, multiply your business miles driven by the current IRS standard mileage rate (65.5 cents per mile-2023). This standard mileage method is meant to cover all driving costs and expenses with the mileage rate. Such as gas fill-ups, all maintenance and repairs, and vehicle payments and depreciation. Which means you are not allowed to deduct those expense as well as the standard mileage rate.

Think low cost and higher miles driven when using the Standard Mileage method. This makes it the easiest and most common option. Since you don’t have to thoroughly track and record every business and vehicle expense. And most rideshare and delivery drivers will claim a larger deduction using this method if they own a gently used, inexpensive vehicle.

Option 2 - Actual Expense Method

To use the Actual Expense deduction, you must thoroughly track the cost you spend to drive. Which includes (but not limited to) gas fill-ups, vehicle loan or leas, insurance, car maintenance and repairs, vehicle depreciation, and vehicle licenses and fees.

Think higher price and low miles driven when using the Actual Expense method. This method is favorable when purchasing or leasing a newer, expensive vehicle. However, tracking actual vehicle expenses requires detailed record-keeping. So, you might want to seek a professional tax accountant for specific advice if using this method.

ℹ️SOURCESℹ️

IRS Source for Information on choosing Actual Expenses or Standard Mileage Rate method:

Topic No. 510, Business Use of Car | Internal Revenue Service (irs.gov)

IRS Source for 2023 Standard Mileage Rate Deduction:

Standard Mileage Rates | Internal Revenue Service (irs.gov)