What is Lyft? What is Uber? Isn't that just a taxi?
The landscape of private transportation changed dramatically when rideshare company Uber first launched their services. They offered a premium black car service as an alternative to the traditional taxi ride.
Historically, rideshare was essentially carpooling where the passenger often covered half of the cost of the trip. Both the driver and rider were heading in the same direction and the goal was for the rider to subsidize the cost of the trip for the driver.
Rideshare today is for profit and the driver has no intended destination, rather is offering transportation services like a taxi. They use an app or website operated by a third party that takes a fee for connecting riders and drivers.
Rideshare: an arrangement between a vehicle owner and a person who enters a pickup location and destination through an app or website, for a fee.
How do Taxes and Deductions Work?
As a rideshare driver you are an independent contractor and not a employee, which means you will be responsible for paying your own statutory deductions like EI, CPP, and federal and provincial income tax.
As you are technically a business, that also means that you can deduct expenses to lower your taxable income, and therefore pay less taxes.
Some expenses you can deduct are:
- License and registrations fees
- Vehicle Maintenance & repair costs
- Car cleaning supplies
- Car washes
- Cell phone and plan
Typically you can only deduct a portion of these expenses that are directly related to your time working as a rideshare driver. This is why it is really important to keep track of your kilometres.
For instance, if you drive 20,000 km in a year and 5,000 km were while driving rideshare, you would typically only deduct 25% of all your gas, repairs etc. from your overall revenue.
Using that example, let’s say your total car expenses for the year were $10,000 and you made $5,000 that year from driving with Uber, you would deduct $2,500 (25%) from your $5,000 therefore lowering taxable income.
You should consult an accountant to help understand what expenses you can deduct and how you prepare your taxes, or use a software like H&R block to do the calculations for you.
You will need an HST number as a rideshare driver, which you get from the CRA. HST is charged on every fare and that extra 13% is included in your take home so you will then need to remit that HST to the CRA.
However, you can deduct the HST from your business expenses and you won’t have to hand it all over to the government.
For example if you collected $1,000 in HST from rideshare fares and you paid $400 HST from expenses, you will only have to give the CRA $600.
Again, it is a bit more complicated then that, especially if you have another job so be sure to talk to an accountant or use a tax filing software that will sort it all out for you.
Insurance has been changing since the launch of rideshare companies in Canada. Each province has its own regulations on insurance and some companies have now offered rideshare endorsements for drivers on their policies.
As required by new laws, all the major rideshare companies now have commercial liability policies that cover the drivers and riders.
There is some debate about what happens when the rideshare companies pay out losses to a passenger or other party for damages that were the result of the drivers actions. As rideshare drivers are independent contractors, the contract they have with companies like Uber typically contain an indemnity clause, whereby Uber could come after the driver to recover any losses they paid out. There hasn’t been a history of this action yet but the rideshare landscape is still new and evolving.
Rideshare drivers are typically required to tell their insurance companies they are offering rideshare services. Some companies prohibit rideshare services while others offer an endorsement or require you to obtain a commercial policy. If you do not disclose that you are using your car for rideshare services, your policy can be voided and if you get into an accident, you will not be covered. This exposes the driver to financial liability, possible fraud charges for failing to tell your insurance company that you were driving for a rideshare company and may result in a cancellation of your policy.
Despite the looser vehicle guidelines and requirements to become a driver, it is generally safer to be a rideshare driver and rider. This is because you typically don’t deal with cash so there is less of a concern over theft, though there have been reported cases of robberies typically where the drivers phone is stolen. Given payment is completed in-app, there is also no concern that the rider will jump out of the vehicle without paying.
When a trip is placed, the rider can see the drivers make, model, and license plate of the vehicle. The drivers name and picture are displayed in the app, this has proven helpful when crimes are reported.
Rides are tracked in real time with GPS and a receipt is emailed to the rider immediately after the trip. Both the rider and driver can see the date, time, pick-up/drop-off location and the route taken in the app after the trip is completed.
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