The face of motoring has changed in recent times and with the likes of Sidecar and Uber coming into the picture, ridesharing is becoming increasingly popular.
Whether you drive a Jeep Grand Cherokee or any other make and model, if you decide to become an independent contractor working for someone like Uber, you will have to sort out your own taxes.
If you are getting behind the wheel and offering your services through companies like Uber, Lyft, Sidecar, or any other car sharing company for that matter, here is a look at some of the best ways to take care of your taxes.
Working for yourself
As an independent contractor and picking up rides through one of these ridesharing services, you will be classed as working for yourself and therefore considered to be self employed.
This technically means that you are both the boss and the employee at the same time.
The driving services that you are taking jobs from will view you as a separate business and payments sent to you for work done, will be sent to you without any taxes deducted beforehand.
That means it is up to you to take responsibility for state income taxes, social security and medical insurance. The prudent approach would be to estimate that these deductions will come to at least 30% of your income received, so arrange to put this percentage of the money aside when it comes in, in order to meet these payments when they are due.
Make use of tax deductions
When you are using your car for business this will enable you to make use of available tax deductions for your car.
There are two main ways to claim a deduction for your vehicle. The first is to deduct the specific expenses you incur for operating the car on business, including costs for gas , oil, maintenance and repairs, insurance and also, depreciation of lease payments if appropriate.
The other main tax deduction to take advantage of is to claim the standard allowable mileage deduction, which permits you to claim a specific rate of cents per mile for business use, depending on current tax rates.
Using your phone for business
If you are working for a ridesharing service, you are going to be using your phone extensively and it is going to be the way that you pick up rides.
It should be allowable to claim for your phone costs, including any activation fees and the cost of the smartphone itself, if you buy a new one for the business.
As a general guide, if at least 50% of your data and minutes are used in the course of your driving work, that portion of the expense should be deductible against your taxes.
Smart and presentable
You are going to be keeping your vehicle smart and presentable for your customers, which means that you are going to be spending money regularly on car washes and cleaning.
Car washes should be considered as part of your business’s ordinary and necessary operating expenses, so you should be able to deduct some of these expense against your taxes due.
These are just some of the ways that you could make the most of tax deductions, so check out what you can claim if you work for a ridesharing company.
Georgina King turned to self employment after being made redundant for the 3rd time last year. Enough was enough and it was time to take her career into her own hands! She writes about self employment topics offering tips and advice for others in a similar situation.