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Rideshare Taxes: Deduct Mileage, Lease Payments or Car Loan?

Rideshare Taxes: Deduct Mileage, Lease Payments or Car Loan?

For additional tax resources, check out my newly launched online course for Uber, Lyft and Sidecar Taxes!

There have been many questions about which deduction to take. The below chart summarizes what deductions you can take if you do one of the three options below. If you pick a column, those are the only deductions you can take. If you see a blank space next to another deduction on another column, you will not be able to take those deductions.

These deductions are all assuming 100% business use, which is impossible. The highest many claim is 90% utilization so multiply any deduction (except standard mileage, if you keep track of your personal and business use case) by 0.9 or however much percentage you use it for business.

Scroll past the chart for more explanation on the different deductions:

Standard Mileage

Expenses (Lease)

Expenses (Depreciation)

MileageLease PaymentsDepreciation
Parking Fees and TollsParking Fees and TollsParking Fees and Tolls
Interest on your Auto LoanInterest on your Auto Loan
Bottled Water/SnacksBottled Water/SnacksBottled Water/Snacks
Registration Fees and TaxesRegistration Fees and Taxes
Garage RentGarage Rent
InsuranceInsurance
Gas (or Diesel)Gas (or Diesel)
OilOil
MaintenanceMaintenance
RepairsRepairs
TiresTires
Licence PlatesLicence Plates
Car WashesCar Washes
Cell Phone BillCell Phone BillCell Phone Bill
In Car EntertainmentIn Car EntertainmentIn Car Entertainment

Here are the times when you use one or the other:

Here is two main methods of tax deductions: Standard Mileage or Expenses

Standard Mileage Rate (56 cents for 2013)

You can not use the standard mileage rate if:

Note. You can elect to use the standard mileage rate if you used a car for hire (such as a taxi) unless the standard mileage rate is otherwise not allowed, as discussed above.

If you use the standard mileage rate, you cannot deduct actual car expenses:

You can still deduct business related:

Actual Expenses

You must use actual expenses if:

If you choose not to, or are unable to use the standard mileage rate, you can deduct the actual expenses associated with your vehicle. This includes but is not limited to:

Tickets and Fines

Car Loan Deduction

How to Deduct based on Mileage:

Record the number of miles you use for your business. I keep logs of every mile I drive on Lyft and Uber and also record the odometer, so I can see what percentage my utilitization is, even though it is not needed for this type of deduction if you kept track of every mile you drive.

You may be able to take the following deductions as well:

See the list above for all the items you CANNOT deduction.

How to Deduct based on Car Expenses:

There are generally two ways to deduct based on actual car expenses:

Let’s start off with a driver who has never deduct any expenses before this tax year.

Expenses (Lease)

Expenses (Depreciation)

Lease PaymentsDepreciation
Parking Fees and TollsParking Fees and Tolls
Interest on your Auto Loan
Bottled Water/SnacksBottled Water/Snacks
Registration Fees and TaxesRegistration Fees and Taxes
Garage RentGarage Rent
InsuranceInsurance
Gas (or Diesel)Gas (or Diesel)
OilOil
MaintenanceMaintenance
RepairsRepairs
TiresTires
Licence PlatesLicence Plates
Car WashesCar Washes
Cell Phone BillCell Phone Bill
In Car EntertainmentIn Car Entertainment

Lease payments

If you lease your car, you can deduct any lease payments including sales tax (http://smallbusiness.chron.com/deduct-monthly-tax-car-lease-19416.html) but except for the gas guzzler tax. Look at the above chart to see what else you can deduct.

As rideshare drivers use the cars a lot, you will inevitably run into the issue of excess mileage fess or exceeding the mileage limit on your lease. In this case, you should deduct your expenses as you can just write off any excess mileage fees you incur while on the lease. http://finance.zacks.com/can-excess-miles-lease-written-off-tax-writeoff-10464.html

Depreciation

This will get complicated. In short, very few people take this route as many of us drivers log too many miles, so many take the mileage deduction as it is much higher than depreciation. In case you are interested in how to do it:

This analysis is for full time drivers who bought any car (new or used) this year and used it for Uber:

Here is the maximum depreciation deduction for cars (Trucks and Vans less than GVWR of 6000 lb is similar amounts)

Dated Placed in Service1st Year2nd Year3rd Year4 & Later years
201311160 (or 3160)510030501875
201211160 (or 3160)510030501875
201111060 (or 3060)490029501775
201011060 (or 3060)490029501775
200910960 (or 2960)480028501775
200810960 (or 2960)480028501775
20073060490028501775
20062960480028501775
20052960470028501675
200410610 (or 2960)480028501675
5/06/2003–12/31/200310710 (or 3060)490029501775
1/01/2003–5/05/20037660 (or 3060)490029501775

(The lower number in the first year is if you do not take the special depreciation in your first year. It is bound by Section 179 of the IRS code)

Many people do the straight-line depreciation method: Divide the cost of the car by 5 and deduct that as a loss each year. However, they are subject the maximums listed above so for many cars, its not worth it. You only get back about 10k after four years, and as we all know, cars cost much more than that.

This does not include any other car expenses, such as gas, maintenance and repairs. If you can get a new car for about $20-30k, the deductions (including special deductions for new cars) will take care of the car within 4 years, assuming you can and will take the special depreciation in your first year.

http://www.smbiz.com/sbrl003.html#dsm

Deduction for Vehicles with GVWR over 6000 pounds

Gross Vehicle Weight Rating (GVWR) is the manufacturer’s specified fully loaded vehicle weight. Special rules apply to vehicles with a GVWR of over 6000 pounds. There are much higher depreciation limits on purchased vehicles with a GVWR over 6,000 pounds. Combine this with a Section 179 deduction and $25,000 of the vehicle cost can be deducted annually.

Deduction on Buying a 2015 Toyota Sequoia LE at $30,000 (Seats 8), GVWR of 7100 lbs

Date Placed in Service1st Year2nd Year3rd Year4th and Later Years
2012-2013 $  25,000.00 + 50% of Residual $  5,100.00 $  3,050.00 $  1,875.00

Changing type of Tax deduction

What if you want to change from mileage to expenses, or from expenses to mileage deduction?

Conclusion:

When it comes to tax time, you should only choose one of three options:

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