How Much Mileage Can You Write Off – One of the biggest mistakes Uber Eats drivers make is not writing car expenses on their taxes.
Don’t make that mistake. Every mile you track and claim can shave 9 to 14 cents off your tax bill (probably more).
How Much Mileage Can You Write Off
Fourteen pennies doesn’t sound like much. But if you’re one of those people who drives thousands of miles, those pennies add up to a big pile.
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If you put 10,000 miles on your car, that’s a $5,600 expense deduction you can claim on your taxes for the 2021 tax year. In other words, it will reduce a lot of your taxable Uber income.
That’s $857 less on your self-employment tax bill. $560 less in income tax if you are in the 10% bracket. By tracking and claiming those miles, you saved $1,417 on your tax return, not to mention state and local taxes.
This is the third article in our series on Uber Eats Taxes. Each article looks at a different aspect of the tax filing process for your deliveries as an independent contractor in the gig economy. You can see the full list of articles from the series here.
We’re going to talk more about reducing your car expenses as an Uber Eats independent contractor (as well as other food delivery services like Doordash, Grubhub, and Instacart). Most of this applies to Uber drivers and Lyft drivers. and food delivery drivers for other services.
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This series is about Uber Eats 1099 taxes in the United States. I know Uber Eats operates in many countries. Most countries handle their gig economy taxes in a similar fashion, but if you’re not in the U.S. there may be significant differences.
This article is not and should not be taken as tax advice. I am not a tax professional or a tax professional. My intention with this and other articles in this series is to provide information, not advice. The idea here is to explain how vehicle expense deductions work in relation to your taxes.
For personal tax advice specific to your own situation, you should seek out a tax professional who can explain things and provide personalized advice for you.
I don’t bother tracking the number of business miles or the number of expenses, because I don’t have enough deductions to mention the incredible number of people making very expensive mistakes.
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This is important: It doesn’t matter if you take the standard deduction or if you itemize. This is because you can’t claim your miles or car expenses as your itemized deductions.
Claiming business expenses on Schedule C is one of the few tax ways you can have your cake (claim business expenses) and eat it too (take a standard tax deduction).
We’ll talk more about this at the end of the article, but you’ll claim your miles or other business expenses in a different place than your itemized deductions. Technically, your miles and expenses aren’t tax deductible, but they are business expenses.
This is done in the income section of your income tax return. Because your income for your delivery business (remember you’re technically a sole proprietor or small business owner here, not an employee) is actually your profit. This is not the money you receive from UberEats as reported on your 1099 forms or tax summary.
Ways To Record Business Miles
What that means is that as part of that revenue process, you need to recognize your profit. You do this with a form called Schedule C. There you list all your income and expenses. After you figure out your gain, you’ll add it to any other income (if any) on your 1040 tax form.
All this before you even think about item discounts. The beauty of this is that you can do all of this whether you itemize your deductions or take the standard deduction.
What does this mean? This means you lose any excuses. You should definitely keep track of your car expenses.
I addressed the whole standard deduction verses topic. This is a great example of how the United States government can simplify your taxes. You can choose to claim and itemize a list of deductions, or you can take a simple flat rate standard deduction.
Deducting Mileage Versus Gas Receipts
They do the same when it comes to claiming your car driving expenses for your business. You have a choice between tracking the cost of each individual car and determining what portion of the total your business owns, or you can claim a flat rate per mile.
You have to choose. In the same way you can’t claim the standard deduction and your mortgage interest on top of that, you can’t claim the mileage allowance and expensive car repairs. Doing this is double dipping.
Each year, the IRS determines a flat rate allowance called the standard mileage allowance. For 2021, that rate is 56 cents per mile. For 2022 miles, the standard mileage rate will increase to 58.5ยข/mile.
Here’s how it works: You keep detailed records of every mile you drive as part of your business. You add those miles and multiply it by 56 cents (per 2021 miles).
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Mileage deduction is not reimbursement. The government is not paying you to drive your car. This is a common misunderstanding I see on driver forums. It is a business expense. This allows you to deduct 56 cents per mile from your business income.
The business mileage deduction isn’t even the cost of operating your car. Actual costs will vary depending on the age and condition of the car. It is not the intention here to say how much it costs. The aim is to come up with a reasonably adequate rate that covers most car owners and thereby ease record keeping and tax filing.
Another thing you can do is keep track of all the expenses you incur to use your car. Then you need to figure out how much your car is used for business, so you know what percentage of those actual expenses you can claim.
Unfortunately you can’t say this tank of gas or oil change was for business, or that this repair was due to all the miles so I can claim the total.
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Your car is like many things that have both business and personal uses. The trick is knowing how much you use for business. For that reason, you should still keep a log of your business miles. Then divide those business miles by the total miles you drove the car during the year.
For example: If you put 10,000 miles on your car and 8,000 of those miles were for business purposes, you can claim 80% of your actual car expenses.
The way the IRS comes up with their standard mileage deduction is that they look at a set of expenses related to the operation of your car. Remember that this is an estimate of a reasonable amount to claim.
The standard mileage rate for business use is based on an annual study of the fixed and variable costs associated with operating an automobile. IRS Statement of Standard Mileage Rates for 2022
Mileage Log For Taxes
In a sense we are talking about both. Both methods are intended to cover the same cost items. The key here is that it is “based on a study of automobile operating costs.”
Some of this is complicated, especially the part about depreciation. The thing is, you can’t write off your car payments on your taxes, because your car is an asset. The IRS treats it as money, which means it’s not really an expense.
However, when an asset loses value, that loss of value is called depreciation. Cars lose a ton of value, especially when we put a lot of miles on them. This is why depreciation is a large part of the actual costing method.
Using the actual cost method, you need a record of each gas fill, all other expenses, and then you figure out your depreciation. Add it all up and multiply it by your business percentage and you have your original cost reduction.
How To Record Mileage
Actual costs will vary slightly. Some cost factors like insurance and registration are the same whether you drive 1 mile or 100,000 miles. The amount you spend on gas, oil, maintenance, etc. increases as you drive more miles.
American drivers average 14,263 miles per year. That’s the subject of the IRS’s study. However, many delivery drivers can double or triple those miles or more. In general, the more miles you drive, the lower the average cost per mile, because fixed costs don’t change with miles.
If you own a newer, more valuable car, your actual costs may be closer to the IRS rate of 56 cents per mile. Because a car loses thousands of dollars in value every year. An old, reliable cheap car will cost much less than that.
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