When you sign up to drive, they sell you the dream: Be your own boss. Set your own hours. Earn great money.
What they don’t give you is the brutally honest, one-page memo that would save you from a world of financial pain a year later.
This is that memo.
The First Shock: The 15.3% Surprise Party
When you have a “normal” job, your employer quietly pays half of your Social Security and Medicare taxes. You only see the other half disappear from your paycheck.
As a rideshare driver, you are your own boss. Congratulations – you now get to pay both halves.
This is called the Self-Employment Tax, and it’s a flat 15.3% tax on your profits that’s added to your regular income tax. It’s the biggest, nastiest surprise for every new driver, and it’s why you can’t just look at your weekly payout and think it’s all yours.
A massive chunk of it already belongs to the IRS.
Your Best Defense: Your Mileage Log
Your car is no longer just a car. It’s a money-making machine, and every mile you drive for your business is a weapon against that tax bill.
You have two ways to deduct your car expenses:
- Actual Expenses: Tracking every single penny you spend on gas, oil changes, insurance, repairs, depreciation, etc. It’s a massive headache.
- Standard Mileage Rate: Tracking every business mile you drive and taking a simple, powerful, per-mile deduction set by the IRS.
For 99% of drivers, the Standard Mileage Rate is the better, easier option. It results in a significant deduction that directly reduces the income you have to pay the 15.3% tax on.
This is not optional. You must track your miles. Not guessing and not estimating. You need a contemporaneous log. Get a mileage tracking app like Stride, Everlance, or Hurdlr. It is the single most important business tool you will own.
The Second Shock: The Income You Never Touched
At the end of the year, Uber or Lyft will send you a 1099 tax form. You’ll look at the “gross earnings” number in the box and think, “Wait, that’s more than I actually received.”
You’re right. That number includes the fees and commissions the platform took from you.
While you can’t deduct those platform fees, it’s the first clue that you are running a real business now. And in a real business, you track all your other expenses to lower your profit on paper. This includes:
- A portion of your cell phone bill
- Snacks and water for passengers
- Car washes and cleaning supplies
- Floor mats, phone mounts, and chargers
- Spotify, Pandora, or satellite radio subscriptions
Use a simple app to scan receipts for these items. They add up and can save you hundreds of dollars.
You’re the CEO Now
Uber and Lyft don’t give you benefits, sick days, or a retirement plan. They give you a platform. That’s it.
You are now the Chief Executive Officer, Chief Financial Officer, and entire HR department of your own driving business. It’s on you to track your miles, log your expenses, and, most importantly, set aside money from every single payout for your future tax bill.
Start today. Your future self will thank you.
