Rideshare Driver Tax Deductions: Mileage, Self-Employment Tax, and QBI

Rideshare driver tax deductions fall into two big buckets: vehicle costs, which you calculate using either the standard mileage rate or actual expenses, and everything else you spend to keep the business running — phone, passenger supplies, tolls, licensing, and health insurance premiums. Because Uber and Lyft treat you as an independent contractor, you report income and deductions on Schedule C, pay self-employment tax on Schedule SE, and settle up with the IRS four times a year rather than through paycheck withholding.

Vehicle Costs: Standard Mileage or Actual Expenses

The vehicle is where most of your deduction lives. The IRS gives you two methods.

The standard mileage rate for 2026 is 72.5 cents per business mile, set by IRS Notice 2026-10.¹ That figure is meant to cover fuel, insurance, oil changes, registration, depreciation, and general wear. You multiply business miles by 72.5 cents, add parking and tolls paid on business trips, and put the total on Schedule C.²

Actual expenses works the other way. You track every dollar spent on gas, tires, repairs, lease payments, and insurance, then deduct the business-use percentage of each. Depreciation gets claimed separately to recover the car’s loss in value. This method usually produces a larger deduction for older cars, high repair bills, or poor fuel economy, but it demands meticulous receipts.

The year-one choice matters. If you want the flexibility to switch methods in later years, you must use the standard mileage rate the first year the car goes into business service. Start with actual expenses and you’re locked into actual expenses for the life of that vehicle.² Most new drivers pick the standard rate the first year just to preserve the option.

One trap: if you use the standard mileage rate, you cannot also deduct gas, insurance, repairs, or depreciation. Those are already in the per-mile figure. Deducting them separately is double-dipping.

Which Miles Actually Count

A lot of drivers only count miles with a passenger in the car and leave real money on the table. Any mile driven while the app is on and you’re available for rides is a business mile, including the drive between drop-off and next pickup. Miles to reach your first pickup of the day and the drive home after your last drop-off also qualify, because you’re actively working during that time.

Personal errands don’t count. If you turn the app off to grab groceries and turn it back on afterward, that grocery run is personal mileage and belongs out of the log. The dividing line is business purpose, and the IRS expects your records to reflect it.

Deductions Beyond the Vehicle

Federal law lets you deduct any expense that is ordinary and necessary for running the business.³ For rideshare drivers, that typically means:

Phone and data. If you use a personal phone for driving, deduct the business-use percentage of the monthly bill and the device itself. Sixty percent business use means 60% of those costs.
Passenger supplies. Bottled water, phone chargers, mints, and similar amenities are fully deductible as business supplies.
Safety equipment. Dash cameras, first-aid kits, and roadside emergency supplies.
Parking and tolls. Fees paid while carrying a passenger or driving toward a pickup. Even under the standard mileage method, parking and tolls are deducted separately on top of the per-mile rate.²
Licensing and permits. Background check fees, local business licenses, and any permit required to drive rideshare in your area.

Self-Employed Health Insurance

Drivers who buy their own health, dental, or vision insurance and aren’t eligible for coverage through a spouse’s employer can deduct 100% of the premiums. This is an above-the-line deduction, so it reduces adjusted gross income directly instead of appearing on Schedule C. You claim it on Schedule 1 using Form 7206.⁴ It covers you, your spouse, your dependents, and any child under 27. For a sole proprietor filing Schedule C, holding the policy in your own name satisfies the requirement that the plan be established under the business.

Self-Employment Tax and Its Deductible Half

As an independent contractor, you pay both the employer and employee shares of Social Security and Medicare. The combined self-employment tax rate is 15.3% — 12.4% for Social Security and 2.9% for Medicare.⁵ The Social Security portion applies to net earnings up to $184,500 in 2026; Medicare has no cap.

You calculate this on Schedule SE and add it to your income tax on Form 1040. The IRS then lets you deduct the employer-equivalent half of your self-employment tax as an adjustment to income.⁶ That doesn’t reduce the self-employment tax itself, but it lowers your income tax. On $40,000 of net profit, that adjustment shaves roughly $2,825 off taxable income.

The Qualified Business Income Deduction

The Section 199A deduction, made permanent by the One, Big, Beautiful Bill Act signed in July 2025, lets eligible self-employed taxpayers deduct up to 23% of qualified business income starting in 2026.⁷ Rideshare driving qualifies: it isn’t a specified service trade or business, and drivers aren’t platform employees.

A driver with $30,000 in net Schedule C profit could deduct up to $6,900. The deduction is limited to the lesser of 23% of qualified business income or 23% of taxable income minus net capital gains. For drivers whose taxable income falls below $203,000 single or $406,000 married filing jointly, it’s usually just 23% of Schedule C net profit. The deduction lives on the 1040, not on Schedule C.

Quarterly Estimated Tax Payments

This is where new drivers get burned. No employer withholds anything, so the IRS expects you to pay as you go. If you expect to owe $1,000 or more in federal tax for the year after any withholding and credits, quarterly payments are required.⁸

For 2026, the deadlines are:

April 15, 2026, for income earned January through March
June 15, 2026, for April and May
September 15, 2026, for June through August
January 15, 2027, for September through December

You can skip the January payment if you file the full 2026 return and pay the remaining balance by February 1, 2027.⁹

Miss a deadline and the IRS charges an underpayment penalty, calculated as interest on what you should have paid. You can avoid the penalty by paying at least 90% of the current year’s tax liability or 100% of last year’s, whichever is smaller. If your prior-year adjusted gross income exceeded $150,000, that safe harbor rises to 110% of last year’s tax.¹⁰ Drivers who also work a W-2 job can sometimes skip quarterly payments entirely by increasing withholding at the day job to cover the rideshare liability.

Records That Make the Deductions Stick

Mileage Log

The mileage log is the single most important record a rideshare driver keeps. Without one, vehicle deductions are essentially indefensible in an audit. The IRS wants four elements for each trip: date, mileage driven, destination, and business purpose.¹¹ Records made at or near the time of the trip carry far more weight than reconstructions done months later. Weekly logs count as timely if they cover use throughout the week. A spreadsheet, a notebook, or a GPS-based app all work, provided the four elements are there and the records are consistent.

Receipts

Keep receipts for every non-mileage business expense: phone bills, supplies, parking, tolls, licensing, and insurance premiums. Bank and credit card statements help corroborate purchases but don’t replace itemized receipts. A statement showing $47 at an auto parts store doesn’t prove what you bought or that it went into the business car.

Forms the Platforms Send

Form 1099-K reports gross payments processed through the platform. For 2026, a platform must issue one only if payments exceed $20,000 and you had more than 200 transactions.¹² A platform may still send one voluntarily below those thresholds. Drivers under the threshold still owe tax on every dollar — the absence of a 1099-K doesn’t change that.

You may also receive Form 1099-NEC for non-ride income like referral bonuses, sign-up incentives, or promotional payments not tied to fares.¹³ Drive for multiple platforms and you’ll get separate forms from each. The IRS already has those gross numbers on file, so your return needs to match.

How It All Lands on the Return

Rideshare income and deductions flow through Schedule C. Vehicle deductions go on Line 9, whether you use the standard mileage rate or actual expenses.² Phone costs, supplies, and other business expenses land under their respective categories or on the “other expenses” line. Schedule C’s bottom line feeds three places: your 1040 income, Schedule SE for self-employment tax, and the QBI calculation.

Schedule SE produces your self-employment tax, which gets added to income tax on the 1040.⁶ The deductible half of self-employment tax and the self-employed health insurance deduction both appear on Schedule 1 as adjustments that reduce adjusted gross income before your final tax is figured. IRS Free File is available if your AGI is $89,000 or less.¹⁴

1
Internal Revenue Service. Standard Mileage Rates Updated for 2026
2
Internal Revenue Service. Instructions for Schedule C (Form 1040)
3
Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses
4
Internal Revenue Service. Instructions for Form 7206
5
Social Security Administration. Contribution and Benefit Base
6
Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)
7
Office of the Law Revision Counsel. 26 USC 199A – Qualified Business Income
8
Internal Revenue Service. Estimated Taxes
9
Internal Revenue Service. 2026 Form 1040-ES Estimated Tax for Individuals
10
Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty
11
Internal Revenue Service. Publication 463 – Travel, Gift, and Car Expenses
12
Internal Revenue Service. Understanding Your Form 1099-K
13
Internal Revenue Service. About Form 1099-NEC, Nonemployee Compensation
14
Internal Revenue Service. E-File: Do Your Taxes for Free