Tax insight for Uber & Lyft drivers
Taxes can be a complicated area for Uber and Lyft drivers, as well as homeowners listing their property on Airbnb.
Although the traditional 9-to-5 job isn’t going anywhere any time soon, more and more people are flocking to the “sharing economy,” a phenomenon made possible by the growing influence of social media and the ability to lend or rent goods and services through online transactions.
You may have even availed of these services yourself. The poster children of the sharing economy are Uber and Lyft, which allow regular drivers to shuttle people around through app-based transactions, as well as Airbnb, where ordinary homeowners can offer their real property for rent.
In response to the growing popularity of the sharing economy, the United States Internal Revenue Service (IRS) has introduced a new Sharing Economy Resource Center. The information hub is designed to assist taxpayers in filing their taxes for income derived from driving Uber- or Lyft-registered vehicles, or from renting out their real property on Airbnb.
If anything, the IRS’ new online resource center clearly shows that the U.S. Federal Government is cognizant of the sharing economy’s remarkable growth, and wants to capitalize on tax revenue from this new breed of service.
According to IRS Commissioner John Koskinen, “This rapidly evolving area often presents new challenges for people engaged in these economic activities, whether they are renting a room or providing a ride. The IRS is working to help people in this area by providing them the information and resources they need to file accurate tax returns.”
5 Tax Tips For Airbnb Hosts and Uber & Lyft Drivers
More importantly, the IRS resource center offers the following tips for U.S. taxpayers who have invested in the sharing economy.
- Income received from ride sharing or property listing ventures is almost always taxable, regardless of whether you receive a form 1099, a form W-2, or any other income statement from companies like Uber, Lyft, or Airbnb. You will still have to pay taxes on any income you receive (cash or not), even if it’s only a part-time venture.
- The good news is that you are still very much entitled to business expenses from these ventures. For example, you can claim certain car expenses if you use your vehicle as an Uber or Lyft driver.
- Things are a little trickier for individuals who earn income from renting off the home or apartment that they also use as a resentence within the tax year. For starters, you need to report rental income in full, with all expenses categorized according to personal or business use. And even then, there are still deduction limits.
- In addition, if you rent out your property less than 15 days within the tax year, you don’t need to report any of the rental income you receive. But, this also means you can’t claim any rental expenses as a tax deduction.
- Income recipients can make estimated tax payments to pay taxes on income not subjected to withholding tax. Deadline for tax payments is on April 15, June 15, September 15, and January 15, with late payments subject to a penalty fee.