The IRS allows you to claim your car expenses if you drive for your deliveries as an independent contractor (or for rideshare trips). Whether you claim the standard mileage rate or use the actual expense method, you must have written evidence of your business miles.
Another article discussed how to track miles for gig economy work. However, it's also essential to understand which miles you can track as a legitimate business deduction.
A common question for delivery drivers is, what miles can I claim on my taxes? When can you start tracking, and when do you have to stop? We'll look at the answers to that, including:
The Delivery Driver's Tax Information Series Disclaimer
About this article
This article is about how how to track mileage in the United States. Other countries have their own tax laws that may or may not be similar. Because there are so many state and local governments, we don't dive into local or state taxes. You should seek out a tax professional who can help you with your locality and the related taxes.
EntreCourier is mainly about the business side of delivery work in the gig economy. Therefore, many examples will be related to food delivery companies like Grubhub, Shipt, Amazon Flex, DeliverThat, and many larger companies.
There are a lot of aspects related to delivery driver taxes. It's impossible to cover it all and do it well in one article. For that reason, this is part of a more comprehensive series on gig worker taxes. We'll link to other articles where appropriate, and at the end, we have a list of all articles in the series.
Finally, this is not tax advice. The purpose is to inform and educate about how taxes work. For advice relative to your personal tax situation, you should seek guidance from a tax professional who is familiar with independent contractor taxes in your area.
The general rule for what counts as business miles for delivery drivers and rideshare drivers.
Any miles explicitly and necessarily driven for your business are deductible. As an independent contractor, you file your taxes as a small business.
The IRS states that to claim a business expense, it must be necessary and ordinary for your type of business. In other words, it must be a regular part of a delivery business like yours and should have a business benefit.
If you have to do mental gymnastics to describe it as a business trip, it probably doesn't fit the IRS definition.
There's an obvious business benefit if you're making money delivering for companies like Doordash, Uber Eats, Instacart, DeliverThat, Roadie, Grubhub, or others. You are driving for business when you are logged in to one of the delivery or rideshare apps with the intent to accept reasonable delivery or trip offers.
Delivery and rideshare trips are not gig worker's only legitimate business trips. Trips to pick up supplies, to a gig company's office, or to prepare your car for delivery all have a business purpose.
The first thing you have to ask yourself is, what's the point of this trip? Is there a business benefit?When can you start tracking your miles as a gig economy contractor?
The moment you log into any of the gig economy apps, with the intent to accept a reasonable offer, you can start tracking. I call this the rule of intent: As long as you intend to do business, you are driving with a business purpose.
You do not have to wait until you accept a delivery offer, nor do you need to wait until arriving at a restaurant. The act of driving with the purpose of seeking out business opportunities is a business activity.
When should you stop tracking your miles?
The rule of intent comes into play here. The moment you have decided that you no longer intend to accept opportunities is the time you are no longer driving for business. Whenever your driving becomes personal or commuting, you are no longer going with a business purpose.
Let's look at the example of driving home at the end of a series of trips. If you're keeping the apps on and interested in taking a trip or delivery while on your way home, that means there's still business intent.
However, if you've decided you're done and are going home regardless of the offers, that has now become a commute. Your tracking ends with the decision that you are finished.
Do you have to stop tracking between trips?
No. Business activity is not limited to times you have passengers or food in your car. Seeking out the next opportunity is a business activity. So is positioning yourself for better offers.
The IRS does not require you to record individual trips. When it comes to delivery and rideshare, when you move from one stop to the next, the entire time you're driving is a business trip.
You can account for several uses of your car that can be considered part of a single use, such as a round trip or uninterrupted business use, with a single record. Minimal personal use, such as a stop for lunch on the way between two business stops, isn’t an interruption of business use.
IRS Publication 463 on combining records for Car Expenses
Based on the language from the IRS here, you do not have to stop recording your miles for minor side trips, such as a lunch break or personal errand, that don't take you far out of the way. However, a personal trip that adds several miles to your journey would not be “minimal personal use,” meaning you should pause recording for such.
4. Know the difference between commuting and business miles.
Commuting miles don't always look like this. Even if you are driving to a spot before you begin y our deliveries for Grubhub, Doordash, Instacart, Uber Eats or Postmates, those are commuting miles.One significant exception to the ability to claim miles is commuting. The IRS does not allow you to deduct miles between home and your place of work.
Daily transportation expenses you incur while traveling from home to one or more regular places of business are generally nondeductible commuting expenses.
IRS Publication 463 under Transportation
Isn't your car your place of work? How is this an issue?
While you do use your car for business, it is not your place of business. The place of business is the geographic area where you are providing delivery or rideshare services.
A good definition of a commute for gig workers is the miles driven from home to whatever point you begin your business miles.
This takes us back to the rule of intent. Your place of business is the location where you first log into a gig app, intending to accept reasonable offers.
If you log in immediately when you leave your home, intending to accept offers, you are driving for business. Those are not commuting miles. However, if you travel to another part of town before logging in, the trip between home and the point you log in is a commute. You can not claim those miles.
The other part of the commute is your return home after your trips are finished. At what point do the business miles end and commuting miles begin?
The answer once again lies with intent. Your trip home becomes a commute as soon as you no longer intend to accept deliveries or rides.
If you complete your last task and decide you're done for the day, and it's time to head home, that trip home is a commute. If, however, you stay logged in as you make your way home, deciding that you will accept a reasonable offer if it comes your way, those continue to be business miles.
Does a home office deduction change things with commuting miles?
If you have an office in your home that qualifies as a principal place of business, you can deduct your daily transportation costs between your home and another work location in the same trade or business.
IRS Publication 463 “Office in the Home”
The IRS states that if you can claim your home office as your principal place of business, that travel from your home to other places of business is deductible. That would overrule everything we just said about commuting, wouldn't it?
It does not. That's because the key word is “if.” We need to also look at this from the IRS.
Example 3. You have no regular office, and you don’t have an office in your home. In this case, the location of your first business contact inside the metropolitan area is considered your office. Transportation expenses between your home and this first contact are nondeductible commuting expenses. Transportation expenses between your last business contact and your home are also nondeductible commuting expenses.
IRS Publication 463 Example 3 under Office in the Home.
In summary, traveling to wherever you start working is not a commute if you have a qualified home office. If you don't, you can not claim that travel.
The question is, do you have a qualified home office as a delivery or rideshare contractor? For most drivers, the answer to that is likely no. That's because of the two requirements you must meet to claim a home office as your primary place of business.
- You have space that is used exclusively for business. You can not use that space for other purposes.
- That space is used regularly and prominently for business. “Incidental or occasional business use is not regular use (IRS Publication 587).”
The regular use clause is what creates a problem for most of us. The nature of gig economy work means there's little need for administrative work. The bulk of what we do is out on the streets.
This is another topic where it is wise to check with your tax professional to see if you have a home office that meets IRS qualifications.
Differences between gig apps can impact whether you have commuting miles.
Different delivery apps have different ways of doing things, which can differently impact whether your first miles are commuting miles.
For instance, Uber Eats and Grubhub are two food delivery services that allow you to go available anywhere within your delivery market.
On the other hand, Doordash has smaller delivery zones. If you have to be physically in that zone before you can log in and don't live in your starting zone, the trip to that zone would be a commute.
Perhaps you work with package delivery or catering orders that require starting at a particular location. For instance, if you deliver for Instacart and start your day at a grocery store, your trip to the grocery store is a commute.
Likewise, the drive to the restaurant is a commute if you have a scheduled catering order for your first trip.
If you multi-app (work for several platforms simultaneously), that often makes it easier to claim the entire trip.
Working multiple apps is one of the best ways to ensure more of your miles are for business
Suppose you were driving to a Doordash zone to start your day but logged in to Uber Eats on your way. If you do so with the intent to accept offers, that trip shifts from a commute to having a business purpose. If you're actively taking orders up until you have to shop at a restaurant, now there's a flow of continual business where you're no longer commuting.
8. Beware of IRS Triggers and Patterns
Your driving patterns often determine whether your first or last miles are business miles or if they are considered commuting.
One factor that triggers an audit more often than most is claiming a large vehicle expense deduction. When you drive for your business, your miles pile up quickly, leaving you more open to an audit.
The good news is that the IRS often looks at these things based on patterns within certain business types. A blogger who works at home isn't likely to have tens of thousands of miles on their tax report. That kind of thing is more common for delivery and rideshare professionals.
Much of the IRS work is done with computers that are always on the lookout for patterns. It's tempting to claim a lot of miles that you didn't drive, but if your deduction falls outside the standard patterns, that can trip a red flag.
9. How to track your miles.
You claim your mileage write-off and other business expenses on IRS form Schedule C. When you claim car expenses, the IRS asks you if you have written documentation.
That means you must track your miles in a way that meets their requirements. Now that you know what miles you can claim, you must understand how to track them.
The IRS requires a detailed record that includes:
- the date of the trip
- how many miles you drove
- where you went
- the business purpose of the trip.
You must develop a system that works for you and meets those requirements. Read more
The Delivery Driver's Tax Information Series
This is part of a series of articles related to different tax topics for independent contractor delivery drivers. Below is a list of other articles in the series.
It is important to understand your taxable income is your profit, NOT your pay from Grubhub Doordash Postmates Uber Eats etc. Schedule C figures that.
We examine the difference between business expenses and tax deductions, and why you can claim your expenses even when taking the standard deduction.
Tax Guide: Understanding Your Income
The following three articles help you understand what your real income is as an independent contractor.
What income do you have to report as a contractor for Grubhub, Doordash, Postmates, Uber Eats and other delivery gigs? How and where do you report?
Episode 57 of the Deliver on Your Business Podcast. Once you receive your 1099 forms from Doordash, Uber Eats, Grubhub, Postmates and others, what do you do with them?
What if the amount reported on your 1099 is incorrect? This is not an uncommon problem. Do NOT just let it ride, incorrect information could cost you a lot in extra taxes
Tax Guide: Understanding Your Expenses
The following eight articles help you understand the expenses you can claim on your Schedule C. Most of these are about your car, your biggest expense.
Introducing and explaining the business expenses as they are claimed on your taxes as a contractor for Grubhub, Doordash, Postmates, Uber Eats.
For those of us who do use our cars for gig economy delivery, the car expense is the largest expense item. You can choose between the standard mileage allowance and actual expenses.
Every mile that you track as a contractor delivering for Doordash, Uber Eats, Grubhub, Instacart, Lyft etc, is saves about 14 cents on your taxes. When you drive thousands of miles, that adds up.
What do I do if I didn't track my miles as a gig economy driver? We look at different places you can find evidence to use in building a mileage log.
It is important to understand your taxable income is your profit, NOT your pay from Grubhub Doordash Postmates Uber Eats etc. Schedule C figures that.
You probably didn't realize that even if you claim the standard mileage deduction, there are some car related expenses you can still claim.
Besides your car, what expenses can you claim as a contractor for Grubhub, Postmates, Uber Eats, Doordash etc? We look at some different possible expenses.
Filling Out Your Tax Forms
Once you understand your income and expenses, what do you do with them? Where does all this information go when you start filling out your taxes?
How do you fill out the Schedule C when you contract with gig companies like Uber Eats, Postmates, Grubhub, Doordash etc.? We talk about different parts of this form.
Understand how self employment tax works as a contractor for Grubhub, Uber Eats, Doordash, Postmates or any other gigs. Know what it is,how much & be ready!
How does our self employed income from Grubhub Doordash Postmates Uber Eats etc impact our income tax? We walk through the process on the 1040 form.
Most of our deductions as self employed contractors go on Schedule C. Four deductions benefitting Grubhub Doordash Postmates Uber Eats Contractors.
We look at how quarterly tax payments work for gig economy workers (Uber Eats, Doordash, Grubhub, Instacart, Uber, Lyft, etc.)
Photo Credit:
entrecourier.com
How much should I save for taxes when delivering for gigs like Grubhub, Doordash, Postmates, Uber Eats and others? These ideas help you prepare for taxes.
Could this help someone else? Please share it.
