What all can you claim on your taxes as an independent contractor for Uber Eats? Obviously we know you can claim the miles you drive, but what else is there?
Are there even enough things to claim to make it worth the time? How do we know which is legitimate and what can get you in trouble?
We're going to look at 41 frequently mentioned business expenses for delivery contractors with Uber Eats.
These expenses would also apply to other food delivery services like Doordash, Grubhub, Instacart and many others. Most of these also apply to rideshare drivers such as Lyft drivers and Uber drivers, though there are some nuances that we'll talk about.
In this article, we'll talk about:
- Can you claim expenses if you don't itemize your deductions? (Hint: Absolutely)
- What qualifies as a deductible expense?
- Why tracking is so important
- Why some expenses may be deductible for Uber and Lyft drivers but not delivery drivers
- 43 Uber Eats business expenses, and whether they are legitimate
But before we go any further…
I am not a tax professional and this article is not tax advice. You should not take this as tax advice. The purpose of this article is to provide information on how taxes work for independent contractors. The intent is purely educational. I'm trying to help you see how the IRS looks at business expense deductions, and I won't tell you what you should claim.
For tax advice related to your particular situation, you should seek out a tax professional. I can't emphasize that enough. Even though I write a lot of articles on taxes, I still use a tax pro myself.
Finally, this article relates to taxes for Uber Eats couriers in the United States. Many nations have similar tax laws but they also have their own details. This information is not intended to try to educate anyone on how taxes work outside the United States.
This is the fourth of a series of articles on Uber Eats taxes. Instead of a simplistic overview of taxes that doesn't answer enough questions, I wanted to provide more detail and felt a multiple article series would be far more helpful.
The final article in the series is our Uber Eats Tax Calculator. Here we'll let you plug in the money you received from Uber Eats, the number of business miles you drove, and the total of the other business expenses talked about in this article to determine your business profit and get an idea how that will impact your total tax picture.
Most concepts here apply to other delivery platforms like Doordash, Instacart, Grubhub, etc., however Uber Eats has just enough nuances about them that I decided to create a separate series.
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Two Big Myths that Keep Uber Eats Drivers from Claiming Expenses
There are two popular myths I see repeated often in social media that cost drivers a lot of money:
- You can not claim expenses if you don't itemize your deductions
- You can not write off ANY business expenses if you claim the standard mileage rate
You absolutely CAN claim your expenses if you take the standard deduction instead of itemizing. As an independent contractor you claim your business expenses on a form called Schedule C. That's done as part of the income section of your taxes. It happens long before you get into itemizing deductions.
Business expenses and tax deductions are actually two very different things. A business expense is a cost of operating and is deducted from your gross earnings to determine your profit. That profit is then moved to the income part of your Form 1040.
Tax deductions are personal costs that are done later in the tax process.
Second, you can claim expenses not related to your car regardless of whether you use the standard mileage allowance or the actual expense method.
People get confused because of the rule that says you can't claim both miles and actual expenses. However, that distinction is between miles and actual CAR expenses. Those are two different methods of calculating the cost of using your car for business.
That rule does not prohibit you from taking your non-car expenses. In fact, there are actually three car related expenses you can claim even when taking miles. We'll get into those later.
What qualifies as a deductible expense?
The IRS has specific criteria that determine if a business expense is deductible. Understanding those criteria will help you get a feel for if an expense is legitimate or not without relying on lists like what I have below.
An article by WCG Certified Public Accountants really explains it well. They explain that a business expense is legitimate if it meets the following tests:
- It's ordinary and necessary for your business
- You paid for it in the tax year
- The expense is directly related to your business
- The expense is reasonable and not lavish or extravagent.
A simpler way to say it is, the expense has to have a business purpose. It has to help you operate your business or help you become more profitable in your business.
If the expense is for personal purposes, it's not a legitimate business expense regardless of whether it fits in any lists.
If you're searching through lists, trying to see if a personal expense might fit in as a write off, it probably isn't an expense.
The most important question in that list above is, is it ordinary and necessary? Is this something that's a common part of what you do? And do you need to get that item to operate your business or make it more profitable?
Why tracking is so important
You need to have evidence of a purchase if you want to claim it as an expense. If it ever comes down to an audit, lack of evidence means not being able to claim the expense.
If you have a good system of tracking your expenses and collecting the receipts, it will do two things for you:
- Protect your claim of that expense
- Make things MUCH easier come tax time.
A lot of good bookkeeping programs allow you to take pictures of your receipts and store them that way. A good program will also give you a report that tells you what to put where on your Schedule C.
The best free resource that I've seen that lets you keep track of your miles AND expenses is Hurdlr's free app. They also have a paid subscription version that adds some features like automatic tracking.
One of the most important things I can tell you about keeping records is: If in doubt, track it. Keep a record of the expense and keep the receipt. You can always ask your tax professional later.
If you track an expense and find out you can't claim it, you haven't hurt yourself. However, if you don't track it and find out later you can claim it, now you have to scramble and see if you can find evidence for that expense.
There are some subtle differences between delivery and rideshare expenses.
A lot of the tax articles I see for Uber Eats, Doordash, Grubhub etc just copy information that's out there for rideshare taxes. There are some things that may be deductible for one but aren't a good fit for the other.
Remember this main rules: It must be reasonable and necessary for your business.
The thing to remember is that many of the rideshare related expense lists assume that you have passengers. There are some things that are reasonable and necessary for keeping a good driver rating when you have passengers that just don't apply to delivery drivers.
And there are some things that delivery drivers need that don't make sense for Uber or Lyft.
All of this brings us back to this very important principle. It's not about whether an expense deduction fits a list. It's about whether the expense is a necessary and ordinary part of running your business.
41 Uber Eats business expenses, and whether they are legitimate
We're going to look at several expense items. Not all of these can be claimed. There are a few where you can rarely claim them if at all. We'll give each one a score:
- Usually deductible. These tend to be more common business expenses IF the item is purchased for your business and meets the qualifications listed above.
- Partially deductible. For certain items that have business and personal uses, you can only claim a percentage of the expense that relates to how much you used that for your business
- Grey area. There are some areas that I don't see wide spread agreement on. Some experts will say you can, others that you can not. Use caution claiming these expenses.
- Rarely deductible. There may be unusual circumstances where someone may be able to make a case for this deduction.
- Deduction but not on Schedule C. These are things where there are special tax deductions elsewhere on your 1040. They cannot be taken as expenses on Schedule C.
You will notice that there aren't a lot of car related expenses below. However, we do have car expenses in the list. That's because this is mostly written with the idea that most people will claim the mileage allowance. If you want to know more about the expenses that are part of the actual expense method, you can read this article in the series about claiming miles or actual car expenses.
And now, on with our list.
There's little real need for advertising as an Uber Eats contractor as they provide all the business opportunities through the driver app. Rare exceptions might be:
- Reaching out to restaurants to create independent delivery relationships
- Purchasing stickers or cards to leave with customers encouraging them to tip or leave a rating.
An app that helps you operate your business is deductible. An example would be Hurdlr Premium which helps you with bookkeeping and mileage tracking. Apps that help you manage your business or help you accept or reject deliveries efficiently are a deductible expense.
Bank and Instant Pay fees.
If you have a separate bank account strictly for your business, you may be able to claim any bank fees from that account. If you use the instant pay feature that assesses a fee for each withdrawall, those fees may be deductible.
Bicycle, Scooter or Motorcycle Expenses
The bad news is you can not claim mileage on bikes, motorcycles or scooters. The good news is, you can claim the business percentage of the actual costs of those vehicles including depreciation, maintenance, repair and accessories used for delivery purposes.
Business insurance is fairly rare among Uber Eats contractors. Auto insurance and rideshare policies usually are part of the standard mileage allowance. Some types of insurance that you might claim include:
- Business liability policies
- Self-employed worker's compensation that may be required in your state
- The business percentage of insurance for your bike, scooter, motorcycle, your cell phone.
If your local government requires you to get a business license in order to operate as a self-employed individual, that license can be written off as a business expense.
Business Loan Interest
Not long ago, I'd have called this “rarely deductible.” Business loans for Uber Eats contractors are rare. The Paycheck Protection Program changed that. If you have had to pay interest for a PPP loan, that is a business loan and interest is deductible. Interest for large purchases for delivery (such as for a bike or scooter) is deductible for the business percentage of the use of that item.
You can claim only the costs of your car related to business use. The IRS gives you two ways to determine business related car costs:
- A flat rate standard mileage allowance (56 cents per mile for 2021 miles, 58.5 cents for 2022)
- Determining what percentage of total miles driven were for business and claiming that percent of actual costs.
You can not claim any car operating costs if you use the mileage method. We go into a lot more detail in another part of this series on claiming mileage or actual expenses as an Uber Eats contractor.
Car Loan Interest
This is one of those rare car expenses you CAN claim even when taking the mileage deduction. Loan interest is not part of the IRS list of actual expense items and is a cost of ownership, not a cost of operation. Calculate what percent of total miles were for business, and you can claim that percentage of your loan interest (but NOT the premium).
There is no circumstance allowing you can write off the payment for a car loan. You can claim the business percent of the interest (see above) but never the principle. That's because principle is not an expense. In its place, you can claim the business percentage of depreciation (loss of value) IF taking the actual car expenses instead of miles.
If you have a lease instead of a loan, you can claim the business percentage of that payment ONLY if claiming actual expenses. We cover car payments in more detail in this article.
Car washes are usually included in the standard mileage allowance and thus not deductible when claiming miles.
Sometimes you'll see experts write that rideshare drivers can claim car washes. That's because you almost need to be fanatical about the cleanliness of your car to keep ratings high and continue driving. This often requires drivers to wash and clean the interior far more frequently than normal car usage.
I personally don't claim car washes for my delivery driving, because I believe normal cleanliness is sufficient since I don't have passengers. I recommend you consult your tax professional to see if your situation justifies writing off car wash expenses.
Any item that you use for both personal and business purposes can only be claimed for the percentage that the item is used for business. For the vast majority of Uber Eats drivers, the cell phone fits in this category. You need to make a reasonable estimate of what percentage of your phone use is for business.
If you lease your phone, you would claim the business percentage of the lease payment under Rentals on Schedule C. If you bought your phone, you would claim the purchase price or depreciation of the phone. Consult your tax professional to see whether you need to capitalize the cost and use depreciation.
Cell Phone Repair
Say you cracked the screen and decided to repair the phone instead of replace it. Or maybe you had to pay a deductible if you had insurance. You can claim the amount proportionate to what percentage of your phone usage is for business.
Cell and Data Services
You can claim the business percentage of the cost of your mobile, cellular, and data services. You would use the same percentage as you do for the cost of your phone. I list this separately from the cost of the phone because often phone service fits a different category on Schedule C than lease or purchase prices. I claim phone service as a line item under Other Expenses, I've heard of some who use Office Expenses for this cost.
Generally you can not claim clothing that you wear during your deliveries. The standard is that if the clothing can be worn as every day wear, you may not claim it as a uniform.
Work clothes are tax deductible if your employer requires you to wear them everyday but they cannot be worn as everyday wear, such as a uniform. However, if your employer requires you to wear suits – which can be worn as everyday wear – you cannot deduct their cost even if you never wear the suits outside of work.H&R Block on claiming a uniform.
Uber Eats can not require independent contractors to wear a specific uniform. Generally that takes away any justification for uniform costs. However, some will make an argument that clothing with a prominent Uber Eats logo or an independent delivery logo is deductible. This is a good one to get advice from your tax pro about.
A dashcam can be one of the best tools for protecting your ability to earn. All of the major food delivery services are notorious for deactivating drivers for unknown reasons or because of a false claim from customers. Many drivers get dashcams to document their deliveries. This creates a legitimate business purpose for the purchase.
Health Insurance for Self Employed
Some health insurance plans for self employed individuals can be taken as a special tax deduction, but not as a business expense. There's a special place on the 1040 form where you take that deduction.
This is an important distinction because when it's not a business expense, it doesn't lower your profits. A tax deduction reduces your taxable income for income tax purposes, but does not reduce your tax basis for self-employment tax.
Home Office Deduction
Very few Uber Eats drivers will qualify for the home office deduction. You can only claim a home office expense if you have space used ONLY for business AND that is used substantially for your business. The nature of delivery work where the app manages almost everything means it's difficult to say you meet that criteria. You can read more about delivery contractors and the home office deduction here.
Hot Bags and Drink Carriers
Uber Eats does not provide delivery bags or hot bags to their contractors. Many restaurants require you have a hot bag, and many customers will rate your delivery on if the food was kept warm. This can make the use of insulated deliver bags a necessity. I have always included my delivery bags under Supplies on Schedule C.
There aren't many situations where one would have legal fees for being a delivery contractor. The most common use is if you create an LLC or corporate structure for your business. If the legal costs are strictly related to your business, they are a legitimate business expense.
Meals eaten while on delivery are not deductible as business expenses. They do not meet the IRS requirements for claiming meals. You can read more about claiming meals as a business expense. You can only claim business meals if meeting with someone for a business purpose. For example, you buy dinner with a friend to recruit them to sign up using your referral code. That meeting has a potential business benefit for you and could be deductible.
For most years, you can only claim 1/2 of the cost of meals. However, for the 2021 and 2022 tax years the IRS is allowing 100% deductions.
If you have a membership with a specific business purpose, you may be able to claim that membership. For example, a Kover membership designed to protect your business income, or membership to an association of independent contractors might qualify.
This is another difference between rideshare and delivery. Many experts say music subscriptions like Spotify are deductible for rideshare because they help create a better atmosphere for passengers. There's a business purpose in that it leads to higher tips. However, they'll say the same doesn't apply to delivery drivers. When there are no passengers, there's no business purpose to having the subscription. If it's solely for your entertainment, the music subscription is a personal expense, not a business one.
Any parking fees you have to pay related to your deliveries are deductible even when claiming miles. However, parking fees from personal trips not related to your business are not deductible.
If you need to obtain any permits for your business, the fees for those permits are deductible. Examples include special parking permits or permits that allow you to operate a business.
For occasional driving, a person normally doesn't need a phone charger. However, with heavy phone use while doing app based work, a charger becomes a necessity to keep your phone operating for longer periods of time.
You can usually tell if someone does rideshare or delivery work by the fact they have a phone holder. The driver app often guides us to our deliveries, or we need easy access to accept or reject delivery offers. A phone holder becomes an efficiency tool, making it ordinary and necessary for a more profitable business.
This is another that I was tempted to call “Rarely Deductible” because I'm not sure how often this might apply to delivery drivers. However, if you take a class or buy a book to help you run your business better, understand business finances or learn how to apply business principles to your delivery business, those are legitimate business expenses.
Be very careful with this one. Professional development that is not related to your business is not a business expense, it's a personal expense. You need to demonstrate how that development relates specifically to your business.
You can write off the business percent of property taxes on anything you use for your business. In the delivery space, that's generally going to be your vehicle. Whatever percentage of miles you drove for business, you can take that percentage of your property tax as a deduction.
If you need to rent items to operate your business, that rental fee is a business expense. An example would be renting an e-Bike or scooter to let you deliver more efficiently in congested areas.
The repair of business property or items you use for business is a deductible expense. We mentioned cell phone repairs earlier where you can claim the business percentage of that repair. You can also claim the business percent of repair costs for motorcycles, bikes, e-Bikes or scooters used for delivery, since you can not claim miles for those vehicles.
This does NOT include your car if you are using the standard mileage allowance. Car repairs are covered by the mileage rate.
There is a place on Form 1040 for SEP, Simple, and qualified retirement plans where you can take a deduction for your contributions. Those contributions do not count as an expense. In other words, they do not reduce your profit and thus do not lower your self-employment tax. As an actual tax deduction, they only reduce your income tax.
I went back and forth on whether to call Roadside Assistance services like AAA a Grey Area. There's some debate over whether you can claim it when taking the mileage deduction. However, I've read enough experts who point out that this is not a normal part of running your car. Instead, it's a supplemental program, and often necessary due to the large number of miles driven. Consult with your tax pro for clarification in your situation.
As independent contractors, we pay double for Social Security and Medicare. It's called Self-employment tax, because the self-employed get to pay both the employer's half AND the employee's half of those taxes.
Employers can write off the payroll taxes they pay for their employees. To level the playing field for self-employed individuals, the government allows you to write off 50% of your self-employment taxes. However, that write-off comes in other places and is not added as an expense on Schedule C.
This is another of those rideshare vs delivery things. Rideshare drivers who provide snacks or bottles of water to their passengers might get to write off that cost. Most years that's only a 50% reduction, though for 2021 and 2022 tax years, the IRS allows a 100% write off.
However, for delivery drivers this is a much less common deduction. Snacks for yourself are NOT deductible, they are a personal expense.
Some drivers, who put together snack packets or give away cold water bottles to customers when delivering on hot days, might be able to write those items off.
If you pay subcontractors to help you with deliveries, that is a deductible expense. Understand that you do have to issue 1099 forms once you've paid them $600 or more. I say this is rarely deductible because the Uber Eats structure makes it difficult to truly use subcontractors.
While tax preparation fees can’t be deducted for personal taxes, they are considered an “ordinary and necessary” expense for businesses. This means, if you are self-employed, you can deduct your preparation and filing costs as part of your business expense deductions.From Can you deduct tax preparation fees by Steward, Ingram & Cooper PLLC.
You may have noticed this as an independent contractor: Tax software and tax preparation fees cost quite a bit more when you start including things like Schedule C. Most free programs won't work with 1099's and business expenses.
Typically you can only claim the portion that relates to your business. You need to identify how much more you would pay because of your business than if just filing a normal personal return. That additional amount is deductible. Check with your tax pro to see how that applies to you.
Which by the way, the fees from your tax pro fit in this topic.
Tolls incurred directly as a part of your delivery work are deductible even when claiming the mileage allowance on your car. Any tolls paid as part of a commute or other personal trip are not deductible.
There are a lot of misconceptions about what qualifies as a business trip. Driving in another town nearby is not a business trip. The general rule of thumb is that it's only a business trip if it requires an overnight stay and that the primary purpose of the trip is for your business. That kind of trip is rare for Uber Eats contractors.
Maybe some day there will be a trade group for independent delivery drivers, or someone will create a driver's convention. Travel for something like that, which has a definite business purpose, is far more likely to be deductible.
I've never needed an inspection for Uber Eats. However, I've heard of some who claimed they needed an inspection. I don't know if somehow their account was set up to do both rideshare AND delivery. Uber Eats does provide insurance, so inspection requirements are always a possibility. If a car inspection is required, that cost is outside the normal cost of operations for your car, and I understand that it is a deductible expense.
Uber Service Fees
Uber Eats does a weird thing with their 1099 forms. They claim you made more money than you actually did, and the difference is in the form of a service fee.
In the example above, the number on the right is what the driver was actually paid. The number on the left is what Uber claims to have paid. The difference is the expenses, fees and tax number in the middle. This driver would claim the larger number as their income, then claim the $2,135.04 as an expense.
Some drivers claim that fee in the Schedule C line item for Commissions, while others report it as a line item under Other Expenses.
There can be a lot of variety in what is claimed.
The thing is, everyone's tax situation is different.
This was written with a focus on Uber Eats delivery contractors. Many drivers also deliver for other platforms, and there may be other nuances with apps like Doordash, Grubhub and Instacart.
The other thing that is very common is if someone does both delivery and rideshare. Or they might do other sharing economy gigs. What that means is, something that might not be a legitimate deduction for someone like me who only does delivery COULD be legitimate for someone who does more.
I have costs and income from this website. There's an entirely different set of expenses common for that type of business. However, the type of business is so different from delivery that I treat them like separate businesses, and I file different Schedule C forms for each.
This is why I say, get a tax pro. Never take a general article like this as tax advice because every person is different.
The designations that I gave to each expense above are based on my understanding for the typical Uber Eats contractor. However, there are always exceptions.
The best thing you can do with this is to understand the main principle: The expense item must be ordinary and necessary for the type of business you operate. Start with that, and use lists like the one above for inspiration or to pique your curiosity.
But in the end… get a tax pro. It's worth it.