If you’re an Uber driver, one of the key decisions you’ll face when tax season rolls around is how to deduct your vehicle expenses. There are two main methods available: the standard mileage deduction and the actual expense deduction (including Section 179 depreciation). Both offer tax benefits, but which one will yield the biggest return depends on your individual situation—such as the type of vehicle you drive and how much business you do.
In this updated guide, we’ll dive into the details of both methods using the latest numbers and tax regulations. We’ll also explore how recent changes, like the bonus depreciation phase-out, may impact your deductions in 2024 and beyond.
The Standard Mileage Deduction
The standard mileage rate is the most commonly used deduction method for Uber drivers. It’s simple: you can deduct a fixed amount per mile driven for business purposes. For the 2025 tax year, the standard mileage rate is $0.70 per mile, marking a slight increase from previous years. This rate covers all operating expenses, including gas, maintenance, insurance, and vehicle registration.
However, the standard mileage rate isn’t always the best option, especially if your vehicle is new or you have significant operating costs.
When to Use the Standard Mileage Rate:
- You drive a lot of miles for business.
- Your vehicle is relatively inexpensive to operate (e.g., lower gas and maintenance costs).
- You don’t plan on using Section 179 depreciation for your vehicle.
- You prefer simplicity and less paperwork.
Limitations:
- If you opt for the standard mileage rate, you can’t deduct actual vehicle expenses for the same vehicle (e.g., gas, repairs, insurance) in the same year.
- You also can’t use the standard mileage rate if you’ve taken a Section 179 deduction on the car in the same year.
- Non-business miles, such as commuting to and from your home or your first/last pickup, can’t be counted.
Section 179: Accelerated Depreciation for New Vehicles
Section 179 of the IRS tax code allows businesses, including Uber drivers, to deduct the cost of a new vehicle (or a used vehicle, in some cases) up to a certain limit, in the year the vehicle is purchased and put into service.
How Section 179 Works:
To qualify for Section 179, the vehicle must be used at least 50% for business purposes. This means that if you drive your car for both personal and business use, you need to track the percentage of time it is used for Uber driving to ensure it meets this requirement.
For vehicles that weigh over 6,000 pounds, such as certain SUVs or trucks, Section 179 allows you to deduct up to $25,000 of the vehicle’s cost in the year it is placed into service. However, for passenger vehicles that weigh less than 6,000 pounds, the maximum deduction for the first year is $18,200 in 2025. This amount is subject to a phase-out if the vehicle’s cost exceeds certain thresholds.
If your vehicle qualifies, you can also apply bonus depreciation, which allows you to take an additional deduction in the same year. For 2025, the bonus depreciation is set at 60% of the vehicle’s cost, meaning you could potentially deduct up to 60% of the cost of a new vehicle in the first year.
To illustrate, if you purchased a $50,000 vehicle that you use exclusively for business, you could claim $18,200 under Section 179. If you also qualify for bonus depreciation, you could deduct an additional $30,000 (60% of $50,000), for a total first-year deduction of $48,200.
What’s New in 2025?
From 2018–2022, the IRS allowed for 100% bonus depreciation, meaning you could potentially deduct the entire cost of a new vehicle, up to certain limits, in the year it was placed into service. As of 2023, bonus depreciation began phasing out, and for 2025, it is now set at 60% of the vehicle’s cost. This percentage will continue to decrease in future years until it phases out entirely in 2027.
Comparing Section 179 and Standard Mileage
So, which option is best for you? Let’s break it down with a simple comparison.
Standard Mileage Rate Example:
If you drive 20,000 miles for Uber in 2024, you could potentially deduct $13,100 (20,000 miles x $0.655 per mile). Keep in mind, this includes all vehicle-related expenses like fuel, maintenance, insurance, and depreciation, but you won’t be able to claim any other vehicle deductions.
Section 179 Example:
If you qualify for Section 179 and bonus depreciation, you could immediately deduct $49,400 for the same vehicle purchase in the same year, provided you’re using it for business 100% of the time.
Clearly, for those purchasing new or expensive vehicles, Section 179 offers a much larger deduction in the first year. However, if you have an older vehicle, or you don’t plan to purchase a new one in the near future, the standard mileage rate may be a more cost-effective option.
Which Method Should You Choose?
Ultimately, the best choice depends on your situation.
Consider the Standard Mileage Deduction if:
- Your vehicle is older or doesn’t require significant maintenance.
- You drive a large number of miles, but don’t want the complexity of tracking actual expenses.
- You prefer the simplicity of the mileage deduction and don’t have large upfront costs.
Consider Section 179 if:
- You’ve purchased a new vehicle or plan to buy one soon.
- You use your vehicle mostly for business (at least 50%).
- You prefer to take a larger deduction upfront, especially if you’ve made a substantial purchase.
The Bottom Line
For Uber drivers, deciding between the standard mileage rate and actual expenses (including Section 179) depends on how much you drive and the type of vehicle you own. While the standard mileage rate provides a simpler option, Section 179 may offer more significant deductions if you’re investing in a new or expensive vehicle.
As tax rules change and phase out certain deductions, it’s always a good idea to consult with a professional tax advisor who can help you maximize your savings based on the latest tax regulations and your specific circumstances.
Still not sure which way to go? Get started with a one-on-one strategy session with one of our tax pros and let us help you minimize your ride share taxes.
