Driving for rideshare is a great way to earn money at your own pace, but it complicates your tax situation too. You work for yourself, so there’s no one to withhold taxes from your check. You’re responsible for paying your own taxes, but you can reduce your year-end tax bill with deductions. Most deductions come from routine expenses associated with your business, but you can also write-off certain types of expenses that don’t relate directly to your business. These Uber driver tax deductions can help you save on your year-end tax bill. Use them to help lower your taxable income and reduce your overall liability.
1. Charitable Contribution
Contributing to an approved charity can earn you an easy tax deduction. Best of all, you have full control over the amount and timing. Donating cash is the obvious option, but you can also contribute stocks, personal property, and other assets. You can even earn a charitable contribution deduction by donating your old clothes or other unwanted stuff. If you donate stocks or real estate, you can avoid paying capital gains taxes for appreciation. Just make sure you ask for a receipt so you can verify the deduction if the IRS asks.
2. Simplified Employee Pension IRA
Self-employed individuals can access a special type of retirement savings account, the Simplified Employee Pension IRA. These accounts are also commonly called ‘self-employed IRAs’. Opening a SEP IRA is extremely simple, and every contribution you make is 100% tax-deductible. However, any money you put in the account is locked in until retirement, and you are subject to penalties if you make an early withdrawal.
In order to qualify for a tax deduction, you must open your account before the final day of the tax year. However, you have until the filing deadline – April 15 of the following year – to make tax-deductible contributions. You can only contribute a certain amount every year, and the total varies based on several factors. Read our post on the best retirement plans for self-employed contractors to learn more about tax-advantaged retirement savings.
3. Health Insurance
Self-employed business owners can also take advantage of health insurance deductions. If you pay insurance premiums for medical, dental, or long-term care, you can deduct them on your tax return. This includes premiums you pay for yourself, your spouse, and your dependents. You can also deduct the cost of insuring adult children who are younger than 28 years old. It doesn’t matter if the children are yours. You can claim them as long as they’re dependent. If you want to reduce your tax bill at the last minute, you can pay your insurance premiums in advance and deduct the cost.
How to Save Even More on Taxes
These Uber drive tax deductions can help you save on your tax bill, but you can save even more money with proper tax planning. The experts at Shared Economy Tax can help you develop a tax strategy that will maximize your tax savings. Plus, we’ll make sure you’re 100% compliant with IRS regulations so you can focus on your business. Get started today with a one-on-one strategy session with a certified tax professional. You can also sign up for our newsletter using the form below for more tax tips.