On this page 7 sections
Key takeaways
- Gig workers can deduct vehicle costs with either the standard mileage rate or the actual expenses method, but only one method per vehicle each year, and starting with actual expenses can lock you out of the mileage rate later.
- The standard mileage rate already factors in gas, maintenance, repairs, depreciation, and insurance, so you don’t track those costs separately under that method.
- Under the actual expenses method, you deduct the business share of vehicle costs; with 70% business use, you can deduct 70% of total actual expenses.
- Only the business-related portion of your vehicle’s use is deductible, so calculate your business and personal use percentage accurately.
- The IRS requires precise records, so avoid estimating mileage or vehicle expenses and use an app or log to track them accurately.
Mileage and Vehicle Expenses: What Gig Workers Can Deduct
For rideshare drivers, delivery workers, and independent contractors, vehicle expenses are often the largest category of tax deductions. Unfortunately, figuring out what can and cannot be claimed can get quite intricate. When done right, these deductions can ease taxes significantly while allowing you to make the most of your income.
In this blog, we will cover the intricacies of vehicle deductions and mileage for independent contractors, IRS approved methods for calculating these deductions, and how WBB Gig Taxes simplifies the process to help you save money.
Why do mileage and vehicle deductions matter for gig workers?
A vehicle is often the most important asset for riders or drivers working on a platform such as Uber, Lyft, DoorDash, or any other platform. Deductions in taxes can be claimed against operating a vehicle including expenses like maintenance and fuel.
Why are tax deductions so crucial?
- They reduce taxable income, meaning you’ll owe less in taxes
- Driving expenses often account for a large portion of your total gig work costs, so deducting them can lead to significant tax savings.
Nevertheless, IRS guidelines and rules have to be followed in order to be compliant and hence avoid any penalties and fines from the IRS.
Two Methods for Deducting Vehicle Expenses
The IRS allows gig workers to deduct vehicle-related expenses using one of two methods:
Standard Mileage Rate
This is the simpler option. The IRS sets a standard rate per mile driven for work purposes, and you can claim this rate as a deduction. For 2024, the rate is 67 cents per mile. The IRS sets a new rate each year (70 cents for 2025), so check the current rate on IRS.gov.- How it works: Multiply the total number of business miles you drove during the year by the standard mileage rate.
- What’s included in the rate: Gas, maintenance, repairs, depreciation, and insurance are all factored into the mileage rate, so you don’t need to track those expenses separately.
- Best for: Gig workers who drive a lot and prefer a simpler method with less record-keeping.
Actual Expenses Method
This method involves calculating your total actual costs for operating your vehicle and deducting the portion used for business purposes. Deductible expenses include:- Gas
- Oil changes
- Repairs and maintenance
- Insurance
- Vehicle registration and license fees
- Lease payments or vehicle depreciation (for owned vehicles)
- Tires
- Best for: Gig workers with higher vehicle costs who use their cars extensively for work.
What Counts as Business Miles?
The IRS has strict rules for what qualifies as business miles. Make sure you only include eligible trips when calculating your mileage deduction:
Deductible business miles include:
- Miles driven while picking up passengers (for rideshare drivers).
- Miles spent driving to deliver food or goods (for delivery drivers).
- Driving between different work locations (e.g., if you work multiple gigs).
- Trips to purchase supplies, refuel your vehicle, or attend work-related meetings.
Non-deductible miles include:
- Commuting miles (e.g., driving from your home to your first gig of the day).
- Personal errands or leisure trips taken in between work-related trips.
Pro Tip: Start tracking your miles as soon as you start your first business-related activity of the day, and log every trip. The drive from home to your first pickup is usually commuting, so it counts only if your home is your principal place of business or another exception in IRS Publication 463 applies.
How to Track Your Miles and Vehicle Expenses
Use a Mileage Tracking App
Apps like Stride, MileIQ, and Everlance can automatically log your trips and track business miles, saving you time and ensuring accuracy.Maintain a Mileage Log
If you prefer to track mileage manually, your log should include:- The date of each trip.
- The starting and ending odometer readings.
- The total miles driven.
- The purpose of the trip.
Keep Receipts for Actual Expenses
If you’re using the actual expenses method, save receipts for gas, oil changes, repairs, and other vehicle-related costs. Use a system (physical or digital) to organize these receipts for easy access during tax season.
Mistakes to Avoid When Deducting Mileage and Vehicle Expenses
Claiming vehicle deductions can be straightforward if you follow IRS rules, but there are some common mistakes to watch out for:
Not Tracking Personal vs. Business Use
Only the portion of your vehicle’s use that’s business-related is deductible. Be sure to calculate this percentage accurately.Claiming Both Mileage and Actual Expenses
You can only use one method to claim deductions each year. Choose the method that gives you the largest deduction and stick with it.Relying on Estimates
The IRS requires precise records. Avoid estimating your mileage or expenses; use tools to track them accurately.Forgetting to Record Trips Regularly
Waiting until the end of the year to document mileage or expenses can lead to errors or missed deductions.
How WBB Gig Taxes Simplifies Vehicle Deductions
At WBB Gig Taxes, we understand the unique challenges faced by drivers, rideshare partners, and other gig workers. Our platform is designed to take the stress out of filing taxes by helping you maximize your deductions and stay compliant with IRS rules.
Here’s how WBB makes it easy:
- Expert Assistance: Our tax professionals specialize in gig worker taxes, ensuring you claim every eligible vehicle deduction.
- Simplified Process: Simply upload your mileage log or vehicle expense records, and we’ll calculate the deductions for you.
- Audit-Proof Deductions: We guide you on maintaining proper documentation so you’re always prepared if the IRS asks for proof.
- Year-Round Support: Whether you need help tracking expenses or estimating quarterly taxes, WBB is here for you year-round.
Conclusion
As a gig worker, your vehicle is a critical part of your business, and properly deducting mileage and expenses can save you thousands of dollars in taxes. Whether you use the standard mileage rate or the actual expenses method, keeping accurate records and staying organized is key to maximizing your tax savings.
With WBB Gig Taxes, you don’t have to navigate the complexities of vehicle deductions on your own. Our expert team is here to help you file with confidence, claim every deduction you deserve, and keep more of your hard-earned money.
Ready to save on taxes? Get started with WBB Gig Taxes today!
Official IRS resources
This article is for general information only and isn’t tax, legal, or financial advice. Tax rules change and every situation is different, so talk to a tax professional about yours.
