In the current scenario, being a rideshare driver is not very easy. There is massive competition in the field, primarily due to the growth of different car services such as Lyft, Uber, etc. Car rates are decreasing every day. With increasing prices of commodities, maintenance of your vehicle is also becoming expensive. All these changes are gradually affecting your total revenue.
But unlike traditional employees, if you are a rideshare driver your taxes will not be withheld from your paychecks. Since you are self-employed, you can claim tax deductions due to business-related expenses, thus reducing your tax amount. If you are aware of a few existing tactics in the field of rideshare driving, you can save some of your hard-earned incomes and thus compensate for your other expenses.
Travelling Expenses
In case you are driving for long distances, you have certain expenses such as fuel, food, commodities, inspections and background checks, digital accessories (music system, mobile accessories, etc.), interior maintenance, parking expenses and lodging. Moreover, it often happens with some drivers that their home is far away from the city, for which they have to travel long distances, to reach their business area. For such situations, the Internal Revenue Service (IRS) has certain provisions which let you claim deductions on tax. To avail those provisions, all you have to do is keep proper records of your expenses, so that while claiming reduction, you have proof of the fact that those expenses were strictly for business.
Concerning your mileage expenses, you have to track your business mileage and multiply the total value by the rate which has been set by the IRS for that specific tax year. Also, you need to keep track of expenses such as gasoline, insurance, maintenance, depreciation and lease payments. You can also avail the services of certain online apps such as QuickBooks Self-Employed to keep track of all these expenses and get tax deductions. By the end of the tax year, present these traveling expenses as a proof and claim your tax deduction.
Banking Expenses
Having a bank account and credit card means you always have to pay small amounts of the fee because of the terms and conditions of the company. But being a rideshare driver, you are self-employed and have your own business, which means you are qualified to have a small business card which can separate your personal and business expenses. There are several business cards available using which you can report tax deductions and business costs. You do not have to apply for one of these cards separately; they are just an alternative to your regular ones, solely for business. Cards such as Chase Ink Cash, Amex Blue Cash, US Bank Business Edge, etc. are prevalent among self-employed business people. They are very useful for a tax deduction. Moreover, they also have added advantages such as redeemable reward points, cash-backs after a certain amount of expenditure, discounts on other purchases both business and personal, and no overall annual fee. Apply for one of these business cards and increase your gross income.
Retirement Benefits
Being a self-employed business person means there is no specific retirement plan. But there are other plans by which you can save for your retirement. The Simplified Employee Pension Individual Retirement Arrangement (SEP IRA) is a plan often adopted by business owners who are self-employed. There is no significant administration cost still you can invest funds the same way as most other IRAs do. Moreover, all the funds you invest are tax-deductible. It simultaneously saves your tax and lets you contribute to your future retirement plan.
Tax Preparation Expenses
Tax preparation is the process of filing income tax returns for compensation or tax owed. It may be done with the help of certain tax preparation software and online services. In general, you would have totally up all your deductible expenses for the tax year; but being self-employed gives you the provision to deduct the preparation fees from your business earnings. There are several sites to set up your tax preparation deduction process, one of them being The Shared Economy CPA, where you can set up a free consultation and thus save some of your bucks.
Health Insurances
If you are working for yourself, looking for the perfect health insurance scheme could be big trouble. But thankfully there are various plans which can provide you with excellent coverage at manageable prices. As per the Affordable Care Act implemented on January 1, 2014, employers as well as individuals are authorized to have health insurance coverage and thus to reduce your adjusted gross income by the total amount of payments you make for health insurance premiums yearly. Being a rideshare driver, you can avail several health insurance plans available online which can cover not only for you but also your spouse and your children.
Initial Start-up Investment
Companies such as Uber and Lyft have specific requirements. So if you are working for one of those companies, your vehicle needs to satisfy those requirements. While starting to work, you might have had to buy new sets of car equipment to be eligible to drive for the company. Such types of expenses are considered to be start-up expenses. Such expenses can be deducted. As per the IRS, you can deduct as much as $5000 in business startup if your initial investment was less than $50,000. You must make sure that you claim the deduction for the tax year during which your business officially opened. In case you fail to do so, you can file an amended return within the next six months of the due date of the return, including the extensions. It is a very helpful strategy used by many rideshare drivers.
If you were not aware of these provisions for tax deductions and kept paying your taxes and simultaneously paying for your music system or all parking tickets from your account, then immediately go online and apply for the appropriate tax deduction scheme.