As a rideshare driver in Canada, there is a lot to know about your income taxes, GST/HST/QST, book-keeping, mileage tracking, deductions and business expenses. When filing your taxes in 2018 as an Uber or Lyft driver, we break down everything you need to know to make sure you get it right.
We investigated some frequently asked questions regarding Uber taxes, expenses
Lyft and Uber Tax Expenses
You may often hear people talk about writing things off, or claiming expenses or deductions. They are kind of used interchangeably and most people are talking about the same things.
Being a small business owner means you can deduct the expenses you paid to operate your business, which in this case as an Uber driver, is providing rides to people for profit. The effect of this is that it lowers your taxable income
What kind of expenses can I deduct or claim?
Some things you can deduct or claim as business expenses are:
- Vehicle repairs
- Car washes
- Maintenance costs, like oil changes
- Parts for your vehicle, like new tires or windshield wipers
- Cell phone and your plan
- Snacks or freebies you give to your riders, like water or candy
- Cell phone mounts
- Vehicle licensing and registration fees
- Phone accessories like chargers, auxiliary cords and handsfree headsets.
- Fluids like windshield wiper fluid, antifreeze, etc.
- Leasing expenses
- Car loan interest
- Safety Standards Certificate for your vehicle inspection
- Some parking fees, such as when you are attending the Greenlight Hub
- Transponder for toll roads like the 407
- Tax software costs and accountant or bookkeeping fees
Are the service/booking fees and commissions considered an expense?
Yes they are! The cut that Uber and Lyft takes is basically a business expense. The customer is paying you and then you have to pay the rideshare company for their services. It just doesn’t seem that way because you never actually get that money in the first place. These fees can be classified as an administrative/management or agent fee. You will get a summary at the end of the year from the rideshare company that will break all this down for you.
The terminology is
Can I deduct parking and speeding tickets as a expense?
Nope, sorry! Breaking the law does not count as an eligible business expense.
How do I calculate my vehicle expenses?
Most rideshare drivers are using their personal car, so it is important you separate the kilometres you drove for Uber and for personal use.
The easiest way to do this is to take a reading of your vehicle’s odometer January 1st and again at the end of the year. Let’s say you drove 20,000 kilometres the whole year.
Now let’s say you report a total of 5,000 kilometres while doing your Uber taxes. That means that you can claim 25% (for most) expenses like gas, oil changes, etc. Things like the purchase price (capital cost) of your car are calculated a little differently.
Ideally you want to keep track of the kilometres as you are driving for Uber but if you didn’t you can find that number in the annual tax summary Uber provides you.
It is better to keep track of it once you start a “shift” because the tax summary is only going to give you the kilometres you drove while on trips and not driving around waiting for pings, getting to a surge zone or on your way to pick up a passenger.
Can I claim my monthly cell phone plan?
You can claim part of it! Unless of course you have a separate phone that you use for work 100% of the time. If you use the same phone for rideshare work as well as personal, you can only claim a partial deduction.
Let’s say you used your cell phone 25% of the time while driving for Uber to run the app, calling passengers, using the navigation apps, then you can claim 25% of your phone plan.
Can I claim food, water and meals?
Sorry, unfortunately not. These expenses are only deductible by 50% if incurred while travelling out of town. Let’s say you take a crazy long trip request from Toronto to Ottawa, then you may be able to claim a meal on your way back. If you buy water for passengers though, that can be included as an expense.
Can I claim my phone?
You can claim part of the purchase of your phone as well. If it is over $500 then it becomes “depreciable property” and you can only claim part of it each year. Again, you can only claim the part of you use for business purposes.
This is similar to claiming the cost of your actual vehicle. Head over to the CRA website for more information
Do I have to claim/report my tips?
Yes as they count towards your total income/business revenue. It would seem highly unlikely to any tax auditor that you never received ANY cash tips. Keep a notepad in your car (or use your phone) to track when you receive a tip. When you are tipped in the app it will be recorded in your income statement. We discuss possible penalties if you do not report income to the CRA in our FAQ on Canadian Rideshare Tax: Uber Drivers and Income Taxes.
I bought a car this year. Can I claim my vehicle?
Your car is an expense itself and will become worn out over the years but you can only claim a certain percentage of the value of the vehicle each year. It is known as “depreciable property” and the deduction is called a “capital cost allowance”. For more information on this you visit the CRA website, talk to an accountant or review the instructions with your online filing software.
Bookkeeping for Uber Taxes
Part of being a good business owner is staying organized. Especially when you are starting out, it can be difficult to keep track of the administrative stuff like bookkeeping. You are most likely just focusing on driving! So, how do we make this easier?
Any good bookkeeping tips for Uber drivers?
Keep your receipts for everything related to your car! Also, keep records of licensing and registration fees, cell phone expenses including monthly plan invoices, gas, repairs, car lease or financing payment statements, etc. Keep track of absolutely everything that could be related to your business as a rideshare driver. A tax professional can tell what is eligible and how much of it you can deduct when it comes tax time.
Keep track of your mileage! You need to know how many kilometres you drove for Uber and how many you drove for personal use. You will only be able to deduct a portion of your expenses relating to your work as an Uber driver.
How can I keep track of my expenses and mileage?
Uber drivers get a discount on Quickbooks software to help organize your expenses. There are many other softwares that help you do this as well, or you can do it manually be creating files for your receipts or saving them online. If you are prone to losing them, try snapping a picture of them with your phone.
There are many free apps that you can use to keep track of your mileage or you can use a spreadsheet. Check out some different options in the Google Play or Apple Store and see what people are using the most
Do I need to keep my receipts? What if I didn’t?
Yes….and No. First, it will be much more helpful for your accountant and easier for you if you keep them all to track your expenses, so don’t make this any harder on yourself than it has to be.
The reason why the answer isn’t strictly yes is that you don’t actually file your receipts with the government at tax time. You simply tell them your expenses in the forms you file.
If the CRA decides to audit you, they may then ask for proof of your expenses and that is where you want your receipts. Some expenses could be disallowed if you can’t prove you paid for them and a receipt is the best way to do so. If you get audited, don’t panic but you are going to want to seek some professional advice for sure at that time.
Also, the debit or credit card transaction slip is not enough. Though that is good to have too, you want the actual itemized receipt showing what you bought, store, date of purchase, the subtotal and the tax.
Why do I need the itemized receipt?
You might wonder why you need the itemized receipt? You need to be able to separate out the expenses (and provide reasonable proof if requested by an auditor) that were for business and for personal as well the tax you paid. So let’s say you got gas and some chips, you need an itemized receipt to show you only accounted for the gas as an expense. Unless of course the chips were for the passengers!
We are not professionals at this but we sure tried hard to gather the best information we could and consult with experts in the field. Nothing here should be taken as professional tax, legal or business advice. Every
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Helpful Rideshare Tax Links
Here are a few more awesome rideshare tax resources we have put together!
- Uber vs. Lyft: What is the difference in Driver Income and Taxes
- Canadian Rideshare Tax: GST, HST, QST for Uber Drivers
- Canadian Rideshare Tax: Uber Drivers and Income Tax