# Exited about tax write offs? Slow down, buddy!



## puber (Aug 31, 2014)

If you don't make a taxable income, then your business is considered a HOBBY by the IRS and every penny is taxable.
You do it for enjoyment and you will pay for making travis richer


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## Uberaccountant (Jan 1, 2015)

puber said:


> If you don't make a taxable income, then your business is considered a HOBBY by the IRS and every penny is taxable.
> You do it for enjoyment and you will pay for making travis richer


I just want to clear this up. *If you drive for a ride sharing company (i.e. Uber, Lyft, Sidecar) then the IRS would not consider this a hobby, but a legitimate business even though fares have decreased to the point where drivers are breaking even or incur an economic loss. *

When it comes to your taxable income from these sources, you can use your legitimate expenses incurred (Vehicle Expenses ---Standard Deduction Rate Per/Mile or Actual Expenses, Accounting and Legal Fees, Ect....)

*
How the IRS decides if your business is a hobby?*
The deciding factor in determining whether a business is legitimate is whether the activity is engaged in "for profit." In other words, you must prove to the IRS that you're trying -- not necessarily succeeding -- to make a profit with your venture. The IRS uses several different criteria for deciding whether or not your business truly has a profit motive.

*The "3-of-5" test.* One popular test for determining profit motive is called the "3-of-5" test. If your business made a profit in any three out of the past five consecutive years, it is presumed to have a profit motive. This means that if you claim a loss for the third straight year after starting your business, you may be inviting an audit.

*Other ways to prove your business is legitimate.* While the IRS gives a lot of weight to the 3-of-5 test, it is not conclusive. You can use virtually any kind of evidence to show that you're trying to make money. Business cards, a well-maintained set of books, a separate business bank account, current business licenses and permits, and advertising or other marketing efforts will all help to persuade an IRS auditor that your activity really is a business.


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## CowboyMC (Aug 26, 2014)

Uberaccountant said:


> I just want to clear this up. *If you drive for a ride sharing company (i.e. Uber, Lyft, Sidecar) then the IRS would not consider this a hobby, but a legitimate business even though fares have decreased to the point where drivers are breaking even or incur an economic loss. *
> 
> When it comes to your taxable income from these sources, you can use your legitimate expenses incurred (Vehicle Expenses ---Standard Deduction Rate Per/Mile or Actual Expenses, Accounting and Legal Fees, Ect....)
> 
> ...


I wouldn't worry about this. Who here would do this we we didn't get paid? Just show Uber a picture of three 250 pounders getting in your car and ask him if he would do this as a hobby. The people that do real hobbies and make some money on the side can worry about this.


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## J. D. (May 13, 2015)

Uberaccountant said:


> I just want to clear this up. *If you drive for a ride sharing company (i.e. Uber, Lyft, Sidecar) then the IRS would not consider this a hobby, but a legitimate business even though fares have decreased to the point where drivers are breaking even or incur an economic loss. *
> 
> When it comes to your taxable income from these sources, you can use your legitimate expenses incurred (Vehicle Expenses ---Standard Deduction Rate Per/Mile or Actual Expenses, Accounting and Legal Fees, Ect....)
> 
> ...


Excellent advice and solid for any sideline business. I've recommended a sideline business to many of my clients over the years. Even though there will be almost no one last 3 years driving for Uber at a loss, there could be a few that use it as a tax reduction strategy since they can use their Uber losses against a full-time job's taxes. It's easy to have a business loss driving for Uber. Just drive the way they recommend. Sorry but I can't recommend Uber if profit is the sole motive.


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## pengduck (Sep 26, 2014)

I think that you must show a profit within 7 years.


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## CowboyMC (Aug 26, 2014)

pengduck said:


> I think that you must show a profit within 7 years.


Example of a business that will not show a profit for over 20 years. Plant walnut trees for lumber. Walnut trees take a long time to grow. Showing a profit is a factor, but not the only factor.


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## LUXYRIDE (Jul 5, 2014)

I drive Uber for the loss (expenses) to go against my full-time, taxable income in Corporate America, as I do not have any dependents at home anymore for deductions. It works well.


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## Kingo9 (May 20, 2015)

I am so _Exited _about my tax write-offs!


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## Cooluberdriver (Nov 29, 2014)

CowboyMC said:


> I wouldn't worry about this. Who here would do this we we didn't get paid? Just show Uber a picture of three 250 pounders getting in your car and ask him if he would do this as a hobby. The people that do real hobbies and make some money on the side can worry about this.


That's funny as hell


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