This is the third of a four part series on frequently asked questions about Doordash and taxes. We focus on how taxes work as a Dasher delivering for Doordash as an independent contractor. Most of these questions and answers would apply working as a contractor for other delivery services as well.
How does our car impact our taxes with Doordash? Understanding your vehicle, the standard mileage allowances and what car expenses you can claim can make a significant difference in how much you pay for taxes.
In fact it's so significant that I decided it was worth dedicating a whole series of FAQ's just to claiming your car.
This is NOT Tax advice.
I am not a tax professional and I do not speak for the IRS. Do not take any of these FAQ's to be tax advice. The intent here is to provide information as I have been able to find it in a way that can help you understand the way that mileage and vehicle expenses work.
These are questions I see get asked all the time. I've researched the questions, often asking tax professionals, often looking things up at the source. I'm doing my best to put the information together in a way that can help you.
For tax answers and advice specific to your situation, you should seek out your own professional advice from a tax professional who understands gig economy delivery that can offer answers that are best suited for you.
Frequently Asked Questions (FAQ's) about using your car, mileage, and Doordash taxes.
I'll list the questions here below and provide links where you can jump to the specific answer down below.
- Can I claim car expenses if I use my car for personal driving as well as for dashing and delivery?
- What is the difference between claiming the standard mileage allowance and actual vehicle expenses?
- What expenses are calculated in the actual expenses as opposed to the standard mileage allowance?
- If I choose the actual expense method, do I still have to track my miles?
- What is meant by depreciation on my car?
- How is depreciation calculated?
- Can I guess the miles I drove for Doordash or other delivery services?
- If I forgot to track miles for Doordash or any others, can I create a log retroactively?
- What does the IRS require for documentation of my miles?
- Do I have to have odometer readings when recording my Doordash miles?
- I just bought a car for delivery. Can I claim that on my taxes?
- Can I claim my car payment if I'm claiming actual expenses?
- Can I claim my car lease payment if I'm claiming actual expenses?
- Which miles can I claim for my Doordash deliveries as business miles?
- What is meant by commuting miles? Can I track from the moment I leave to the moment I get home from Dashing?
- Is it better to claim actual expenses or the standard mileage allowance as a Dasher?
- Can I claim miles on one vehicle and actual expense on another?
- Can I claim miles if I use a friend's car?
- Are there any car expenses that I can claim even when using the standard mileage allowance?
Frequently asked questions (and answers based on my research) on claiming your car and mileage on Doordash taxes
Can I claim car expenses if I use my car for personal driving as well as for dashing and delivery?
Yes. You can claim the business portion of your driving. You can do this either by claiming the standard mileage allowance for the business miles you drove, or you can calculate what percent of your miles were for business and then expense the business percentage of the actual costs.
What is the difference between claiming the standard mileage allowance and actual vehicle expenses?
In an attempt to simplify the recording of vehicle expenses, the IRS allows you to claim a flat rate per mile instead of trying to figure out every detail of what your vehicle expenses are. This allows you to choose one or the other. The standard mileage rate allows you to claim a business expense of 57.5 cents per mile driven for your Doordash and other deliveries for the 2020 tax year (56 cents per mile for the 2021 tax year). Otherwise you would need to track every expense related to your car, calculate depreciation costs, and then claim the percent of those total costs that relates to what driving was related to your business.
What expenses are calculated in the actual expenses as opposed to the standard mileage allowance?
The IRS states in Topic 510 that actual expenses include “gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation (or lease payments) attributable to the portion of the total miles driven that are business miles.” If for example, 80% of your miles driven were for your delivery, you could claim 80% of the total of those costs. If you choose to claim the standard mileage allowance instead, you would not be able to claim any of these items as an expense.
If I choose the actual expense method, do I still have to track my miles?
Yes. To claim the actual expenses, you have to know the percent of miles that were driven for business. This requires that you know both how many total miles were put on your car for the year, as well as how many of those miles were for business. This requires that you still have a log of how many business miles you drove.
What is meant by depreciation on my car?
Depreciation is the loss of value of your car. A car is considered an asset that is expected to have a useful life of more than one year. When you buy a car you are trading one asset (money) for another (your car) so it is assumed you have the same total of assets after the purchase. Therefore, that purchase isn't considered an expense. The expense happens when a car loses value.
Here's an example. You spend $10,000 to purchase a used car. In return, you have a car worth $10,000. Your financial position is the same after that purchase, so the purchase isn't considered an expense. However, a year later, if your car is now worth only $8,000, now your financial position is reduced by $2,000. That loss in position is a legitimate expense and depreciation is the term for that loss of value.
How is depreciation calculated?
For purposes of calculating the expense for your taxes, the IRS has a couple of different methods that they use.
If this is the first year that you use the car for your business, you are required to use a formula the IRS calls MACRS. The MACRS system allows you to write the car off over 6 years, with higher percentages claimed the first couple of years and smaller percentages the following years. You can see more on how MACRS works on Table 4-1 in IRS Publication 463.
If you have taken the standard mileage allowance in the first year you owned the car and decide to switch to actual value in later years, you then are required to use a straight line depreciation method which allows you to take 1/5 of the purchase price of the car as despreciation in the second, third, fourth or fifth year you have the car.
Can I guess the miles I drove for Doordash or other delivery services?
The IRS will not allow just an estimate. They require a day to day log of your miles. While it is possible to put an estimate down when filing your taxes, understand that if audited, the auditor may completely disallow any vehicle expense and charge you for the additional taxes with penalties and interest.
If I forgot to track miles for Doordash or any others, can I create a log retroactively?
The IRS does make some room for if your records were not complete. However, you need to have evidence to support what you are claiming. In IRS Publication 463 they state “For example, the nature of your work, such as making deliveries, provides circumstantial evidence of the use of your car for business purposes. Invoices of deliveries establish when you used the car for business.”
It is possible to create a log based on other evidence. You may have records of your deliveries with Doordash or other apps that allow you to pinpoint when and where you made deliveries, and calculate the distances that were related. If you have evidence of where you drove, and related evidence from Doordash or other apps that you were on deliveries, you can use that to determine when you delivered. You can learn more here about options to help you determine your miles if your log is incomplete
What does the IRS require for documentation of my miles?
When you file your taxes, you have to certify on Part IV: Information on Your Vehicle that you have evidence to support your deduction and that the evidence is written. Whether you keep a mileage log or you use an app like Hurdlr or TripLog, you need to be able to put that information into a written log that satsifies these four requrements:
- It has a date (meaning the log needs to be a day by day log)
- It lists the total miles driven
- You have a description of where you went
- You have a description of the business purpose of the trip
Do I have to have odometer readings when recording my Doordash miles?
An odometer reading is not specifically required. However, consistent odometer readings go a long way to establish the legitimacy of your log. It helps substantiate that you are not claiming more miles than what you put on your car. It can also be cross referenced to maintenenace records to show that the miles were being kept consistently.
I just bought a car for delivery. Can I claim that on my taxes?
You cannot claim the purchase price on your car. The IRS does not see the purchase of an asset that has value as an expense. You are receiving something of similar value in exchange for the money you paid. This is not considered an expense. You may however claim the depreciation, or loss of value, of the car over time. See question 5 for more on depreciation.
In the first year that you purchase a vehicle, you may be able to claim a Section 179 depreciation that allows you to depreciate the full value of the car all at once (up to a certain amount). Keep in mind if you choose to do this that
- you are not allowed to claim the mileage allowance at the same time, it must be done as part of claiming actual value of the car
- you will be committed to using the actual value method for the remainder of the time that car is in service
- you will not be allowed to depreciate the vehicle in later years as you've already taken the full depreciation
- if you sell the car later for more than what you've depreciated, you will have to claim the difference between what you depreciated and what you received as income.
Can I claim my car payment if I'm claiming actual expenses?
Partially. You cannot claim the principle, as that is part of the purchase of your vehicle described in Question 11 above. However, you can claim the business percent of your interest. If for example, 60% of your miles were for business, you could claim 60% of the interest portion of your payment.
Can I claim my car lease payment if I'm claiming actual expenses?
Yes. If you are claiming actual expenses, you can claim the entire lease payment of your car. This is because you never actually obtain ownership in the car. However, that also means you would not be able to claim deprectiation on the car.
Which miles can I claim for my Doordash deliveries as business miles?
You can claim any miles related to the business of your delivery work. You can use the same rule of thumb that the IRS uses for any business expense: is it necessary and ordinary to drive these miles for your business? More specifically, any time that you are actively logged into an app with intent and ability to accept offers, you are engaged in business miles. That means you don't have to keep a separate record between deliveries nor do you need to shut down your recording once you've dropped off a delivery.
What is meant by commuting miles? Can I track from the moment I leave to the moment I get home from Dashing?
Commuting miles are not considered business miles. It is possible to have commuting miles when dashing. If you have to drive somewhere to be in a position to deliver, I would consider that a commute. When you are returning home from a delivery, with no intent of accepting any offers along the way, I would also consider that a commute.
Because Doordash uses smaller delivery zones, you may have a higher probability of having commuting miles. In particular, if you do not live in the zone that you intend to start your deliveries, you will have a commute. It's not possible to log into the app until you are physically in the zone that you will be delivering. The drive from your home to the point that you can log in would reasonably called a commute.
Is it better to claim actual expenses or the standard mileage allowance as a Dasher?
More often than not, the standard mileage allowance will give you a higher expense that you can claim than the actual expense method. This is especially true if you drive a significant number of miles. Your actual cost per mile decreases when you drive more because the fixed costs tend to spread out over more miles.
However, this is not a set rule. Newer and more valuable vehicles often have much higher registration, insurance, and depreciation costs which may drive the actual cost per mile higher than the standard mileage allowance.
There may be times when claiming the actual expense may not be the best decision long term. For example, you bought a car during the year 2020 and you choose to use the Section 179 depreciation. You can write off significantly more using that and other actual costs than the 57.5 per mile would allow. However, claiming actual expenses in the first year prevents you from claiming miles any following years, and since you've already written off the entire depreciation, you're actual costs for gas, maintenance, and insurance in following years would be far less than you could get in following years. Depreciating the entire purchase can let you write off more the first year but could cost you in higher taxes the following years.
Can I claim miles on one vehicle and actual expense on another?
You can treat different vehicles differently. You need to track your miles and expenses for each vehicle and fill in your Schedule C continuation for Part IV with information for each vehicle. For example, you might dash normally in an older, lower cost vehicle and choose the standard mileage deduction for that vehicle. However, while that is in the shop, you dash for a couple days in your other car which is newer and has a higher actual cost per mile, and for that one you can claim the business percent of actual costs.
Be aware that some tax programs, especially the free ones, may not be equipped to handle information for more than one vehicle.
Can I claim miles if I use a friend's car?
No. The IRS specifically states that you must own or lease the car to claim the standard mileage rate. This is because the standard mileage rate is intended to replace actual cost of the vehicle. You do not have all the costs of ownership that go with using your friend's vehicle. If you reimburse your friend for the use of hte car and have a receipt for that use, you can claim that reimbursement as an expense.
Are there any car expenses that I can claim even when using the standard mileage allowance?
Yes. Three come to mind. Parking and tolls related to your deliveries, the business percent of property tax you pay on your vehicle, and the business percent of your interest on your loan if your car is financed. You can read more about these three car expenses here.