# The Truth about the IRS $0.57/mile tax deduction



## kalaks98

Some people here think that the IRS will give you a $0.57/mile tax credit to your bottom line, this is incorrect.
When the IRS give you this $0.57/mile expense deduction, it does not go to your bottom line, here is how it works.

Assume you have an income of $30,000, and you drove 10,000 miles a year for Uber
so your milage _expense dedcution_ is $5,700 per the IRS (10,000 miles * $0.57)
The IRS is permiting you to report taxable income of $24,300 (30,000 - 5,700)
For simplicity, lets assume your effective tax rate is 10%
So, instead of paying $3,000 in taxes (30,000 * 10%), you are paying $2,430 in taxes (24,300 * 10%),,,,,,,, $570 is the difference!!!!
Bottom line, for the 10,000 miles you drove for Uber, the IRS is only giving you back a $570 credit to your bottom line, NOT $5,700 !!
SO, the true expense per mile you can decduct on your bottom line is $0.057/mile ( $570/10,000 miles).......... HALF a CENT per mile.
You are getting bottom line credit on your taxes of $0.057/mile, NOT $0.57/mile

Hope everybody get to know this fact.


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## Schulz

Thanks for the 411. Copied and saved


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## marketmark

I earned about $30k with Uber this year.

I will claim to have driven about 42K miles giving me about $23k in expenses at 56c/mile.
My net income for the year from Ubering will be about $7k at about 30% in taxes.
I figure my tax bill from Ubering will be about $2,500.

If I would have sold my car at the beginning of the year it would have been worth about $9k, now I could sell it for about $7k.
I figure $2k depreciation.

I spent about $4k in gas.

I spent under $1,500 in maintenance (includes front and rear brakes + 1 set of tires)

My $30k - $2.5k(taxes) - $2k(depreciation) - $4k(gas) - $1.5k(maintenance) = $20k for a part time job with near infinite scheduling flexibility.

I don't know how many hours I worked but it is less than 1,000. I rarely worked more than 20 hours/week and worked 0 hours often...


I originally was just going to respond to your post, but got carried away with my typing so it is a bit off subject.
Long story short is the 56c/mile IRS credit only serves to lower your tax bill, nothing else.
You will be paying more than 10% tax on your Uber profit so your bottom line tax savings will be quite a bit more than 5.6c/mile.


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## LAuberX

Mileage OR expenses. You can't use both.

Gas, tires, brakes and oil changes are ALL Included in the .56/mile deduction.


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## LAuberX

Oh, and IF your 1099 from Uber says they paid you $30,000.00 dollars I guarantee that you drove 40,000 miles OR MORE!

40,000x.56=$22,400 deduction. With an "Income" of $7,600.00 you are NOT in the 30% tax bracket either federal or state.

You are less than poor.

Uber, its a minimum wage gig with no boss and a great view, that's it.


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## marketmark

LAuberX said:


> 40,000x.56=$22,400 deduction. With an "Income" of $7,600.00 you are NOT in the 30% tax bracket either federal or state.
> 
> You are less than poor.


Uber is part time work for me. I, and my wife, also have full time jobs so we pay higher taxes than only a $30k income.
When figuring your taxes for 1099 work, count your federal tax + state taxes + self-employment taxes. You will likely pay closer to 30% on your Uber income than 10%, but your situation might be different...



LAuberX said:


> Oh, and IF your 1099 from Uber says they paid you $30,000.00 dollars I guarantee that you drove 40,000 miles OR MORE!


I said I drove 42,000 miles so I agree with you.



LAuberX said:


> Mileage OR expenses. You can't use both.
> 
> Gas, tires, brakes and oil changes are ALL Included in the .56/mile deduction.


In my numbers I used the standard deduction for figuring my tax liability. I used my actual numbers to figure my actual expenses as they are much less than 56c/mile. That is how I got to my "net" number, so I don't understand your comment...



LAuberX said:


> Uber, its a minimum wage gig with no boss and a great view, that's it.


I figure Uber (for 2014, for me) was equivalent (after taxes and expenses) to a $25/hr part time job, but with great flexibility.
In 2015, with lower rates and more drivers out there, it likely won't be that lucrative.
The view IS sometimes great and occasionally even entertaining....


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## ElectroFuzz

kalaks98 said:


> Assume you have an income of $30,000, and you drove 10,000 miles a year for Uber


I'll take it!
Lets see...... 10,000 miles, half dead miles, 5,000 paid miles.
$30,000 divided by 5,000 = $6 per mile !
I wish Uber will pay me $6 per mile that would be wonderful.

OK, I understand this was just an example but couldn't you give 
an example that closer resembles reality.
Some people might get the wrong impression here.


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## UberHammer

kalaks98 said:


> Some people here think that the IRS will give you a $0.57/mile tax credit to your bottom line, this is incorrect.
> When the IRS give you this $0.57/mile expense deduction, it does not go to your bottom line, here is how it works.
> 
> Assume you have an income of $30,000, and you drove 10,000 miles a year for Uber
> so your milage _expense dedcution_ is $5,700 per the IRS (10,000 miles * $0.57)
> The IRS is permiting you to report taxable income of $24,300 (30,000 - 5,700)
> For simplicity, lets assume your effective tax rate is 10%
> So, instead of paying $3,000 in taxes (30,000 * 10%), you are paying $2,430 in taxes (24,300 * 10%),,,,,,,, $570 is the difference!!!!
> Bottom line, for the 10,000 miles you drove for Uber, the IRS is only giving you back a $570 credit to your bottom line, NOT $5,700 !!
> SO, the true expense per mile you can decduct on your bottom line is $0.057/mile ( $570/10,000 miles).......... HALF a CENT per mile.
> You are getting bottom line credit on your taxes of $0.057/mile, NOT $0.57/mile
> 
> Hope everybody get to know this fact.


This is correct.

However, don't forget that any taxable income below $117,00o in 2014 must pay social security tax of 7.3%. And if that income that is NOT from employment, than an additional 7.3% must be paid (because employers must match what the employee pays). So Social Security taxes alone are 14.6%. So the tax savings is well above 10% of the deduction for those whose income is entirely Uber (for those with other income it could be a lot different).

On the complete other side of the spectrum, some drivers who get all their income from Uber may not want to deduct their costs at all. This is because the earned income credit could produce a higher post-tax net than deducting their costs and avoiding tax produces. Any driver with kids should have their taxes done by an accountant to know which method would benefit them the most.


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## LAuberX

I was responding to the OP, sorry marketmark for the confusion.

Everybody has a different tax situation, no doubt.

Uber still pays minimum wage.


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## Oc_DriverX

kalaks98 said:


> Some people here think that the IRS will give you a $0.57/mile tax credit to your bottom line, this is incorrect.


I don't think I have seen anyone post about getting a tax credit, so I believe that your assumption for this post is off base.

I think that you are confusing a driver's profit and loss, and their taxes. These are two separate, but related issues.



kalaks98 said:


> ......
> 
> When the IRS give you this $0.57/mile expense deduction, it does not go to your bottom line, here is how it works.
> 
> Assume you have an income of $30,000, and you drove 10,000 miles a year for Uber
> so your milage _expense dedcution_ is $5,700 per the IRS (10,000 miles * $0.57)
> The IRS is permiting you to report taxable income of $24,300 (30,000 - 5,700)
> For simplicity, lets assume your effective tax rate is 10%
> So, instead of paying $3,000 in taxes (30,000 * 10%), you are paying $2,430 in taxes (24,300 * 10%),,,,,,,, $570 is the difference!!!!
> Bottom line, for the 10,000 miles you drove for Uber, the IRS is only giving you back a $570 credit to your bottom line, NOT $5,700 !!
> ...


When you are in business as an independent contractor, as all Uber drivers are, you owe taxes on your operating profits. To use your example, the $5,700 figure are your expenses to drive for Uber and are correctly deducted from the $30,000 that Uber paid you. I would call the $30,000 revenue and not income, since expenses are not included in that number. Your profits (or income) are $24,300, and the taxes are $2,430 (@ 10%).
(Income definition: http://www.businessdictionary.com/definition/income.html)

The IRS figure is one that you are allowed to use to calculate expenses. As an alternative, you could choose to actually come to a number on your own. You could do this by tracking your fuel expenses, calculating the depreciation of your specific car, and calculating the per mile maintenance costs for a car such as yours.

Its as if you are looking at this in the same way as income listed on a W-2, all of which is taxable. Your Uber 1099 is a just a listing of revenue paid to you. You then need to calculate your expenses to come up with your profit to report on line 12 of your Form 1040. Strictly speaking, the IRS is not giving you back a $570 credit. The $570 is the difference in the taxes you would owe if you had for some reason not had any expenses at all.



kalaks98 said:


> SO, the true expense per mile you can decduct on your bottom line is $0.057/mile ( $570/10,000 miles).......... HALF a CENT per mile.
> You are getting bottom line credit on your taxes of $0.057/mile, NOT $0.57/mile
> 
> Hope everybody get to know this fact.


I believe that this last section is utterly misleading. The true expense you can deduct from your revenues is $0.57/mile (actually $0.575/mile as of 1/1/2015) and that is used to calculate your income or operating profit. Because you have this expense, you will owe $570 (your number) less than if you had not had any expenses. In this case, I would argue it is more important to focus on the expenses as they relate to your revenues than it does to focus on the taxes. If you make money, you will pay taxes. With lower fare rates, the question becomes whether there is still money to be made, and if so, how much.


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## ElectroFuzz

Just a quick note:
If you show your Uber income as a loss (no tax paid) year after year
the IRS might deem your Uber activity as a hobby and you will lose the $0.57 deduction.

Not that I think this will ever happen.
Most likely most of us won't be here in 2 years.
Heck even Uber might not be here in 2 years.


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## Oc_DriverX

I believe a rule of thumb is that you need to make money in 3 of the five prior years.


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## UberHammer

ElectroFuzz said:


> Just a quick note:
> If you show your Uber income as a loss (no tax paid) year after year
> the IRS might deem your Uber activity as a hobby and you will lose the $0.57 deduction.
> 
> Not that I think this will ever happen.
> Most likely most of us won't be here in 2 years.
> Heck even Uber might not be here in 2 years.


You would lose only the amount of the deduction that would reduce taxes on other income.

For example, if you earned $20K of taxable income from another job, and had $10K in Uber revenue with $11K in Uber mileage deduction, then not only is all your Uber revenue not taxable, but you also reduce the taxable income from your other job from $20K down to $19K. The IRS will only let you do this for couple years before they deem the Uber driving a hobby. At that point you still deduct $11K in mileage from $10K in Uber revenue, but you can no longer benefit from the extra $1000 in mileage costs, as your "hobby" can't reduce the taxes owed on real income. Being deemed a hobby doesn't require you to pay taxes on the $10K in Uber revenue when the hobby costs more than $10K to do.


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## ReviTULize

kalaks98 said:


> Some people here think that the IRS will give you a $0.57/mile tax credit to your bottom line, this is incorrect.
> When the IRS give you this $0.57/mile expense deduction, it does not go to your bottom line, here is how it works.
> 
> Assume you have an income of $30,000, and you drove 10,000 miles a year for Uber
> so your milage _expense dedcution_ is $5,700 per the IRS (10,000 miles * $0.57)
> The IRS is permiting you to report taxable income of $24,300 (30,000 - 5,700)
> For simplicity, lets assume your effective tax rate is 10%
> So, instead of paying $3,000 in taxes (30,000 * 10%), you are paying $2,430 in taxes (24,300 * 10%),,,,,,,, $570 is the difference!!!!
> Bottom line, for the 10,000 miles you drove for Uber, the IRS is only giving you back a $570 credit to your bottom line, NOT $5,700 !!
> SO, the true expense per mile you can decduct on your bottom line is $0.057/mile ( $570/10,000 miles).......... HALF a CENT per mile.
> You are getting bottom line credit on your taxes of $0.057/mile, NOT $0.57/mile
> 
> Hope everybody get to know this fact.


You can still deduct car washes, waters, ice, cell phone(even uber iphone weekly charge), uniform, cables, headrest valet, phone holder, etc... if you work out of your house to do anything uber-related(marketing, research) you can write off the office square footage from your mortgage/rent


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## Uber SUCKS for drivers!

kalaks98 said:


> Some people here think that the IRS will give you a $0.57/mile tax credit to your bottom line, this is incorrect.
> When the IRS give you this $0.57/mile expense deduction, it does not go to your bottom line, here is how it works.
> 
> Assume you have an income of $30,000, and you drove 10,000 miles a year for Uber
> so your milage _expense dedcution_ is $5,700 per the IRS (10,000 miles * $0.57)
> The IRS is permiting you to report taxable income of $24,300 (30,000 - 5,700)
> For simplicity, lets assume your effective tax rate is 10%
> So, instead of paying $3,000 in taxes (30,000 * 10%), you are paying $2,430 in taxes (24,300 * 10%),,,,,,,, $570 is the difference!!!!
> Bottom line, for the 10,000 miles you drove for Uber, the IRS is only giving you back a $570 credit to your bottom line, NOT $5,700 !!
> SO, the true expense per mile you can decduct on your bottom line is $0.057/mile ( $570/10,000 miles).......... HALF a CENT per mile.
> You are getting bottom line credit on your taxes of $0.057/mile, NOT $0.57/mile
> 
> Hope everybody get to know this fact.


This is a ridiculous example because $3ok cant come from 10k miles!
That implies Uber is paying $6/mile (with half dead miles, or $3/mile with no dead (no such thing)). If you drove 10k with Uber, your goss revenue would be more like $5k, you would get the full $5,700 (& $.57/mile) and pay no taxes! In your example you have watered down the per mile credit, because you're offsetting other household (non driving) income! "Hope everybody get to know this fact"


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## Uber SUCKS for drivers!

marketmark said:


> Uber is part time work for me. I, and my wife, also have full time jobs so we pay higher taxes than only a $30k income.
> When figuring your taxes for 1099 work, count your federal tax + state taxes + self-employment taxes. You will likely pay closer to 30% on your Uber income than 10%, but your situation might be different...
> 
> I said I drove 42,000 miles so I agree with you.
> 
> In my numbers I used the standard deduction for figuring my tax liability. I used my actual numbers to figure my actual expenses as they are much less than 56c/mile. That is how I got to my "net" number, so I don't understand your comment...
> 
> I figure Uber (for 2014, for me) was equivalent (after taxes and expenses) to a $25/hr part time job, but with great flexibility.
> In 2015, with lower rates and more drivers out there, it likely won't be that lucrative.
> The view IS sometimes great and occasionally even entertaining....


Ok, $25/hr after expenses, who you trying to kid? Boy, thats some kinda mystical "Obama math"! I can only think that you left out a decimal point, and meant $2.5/hr ?? Its been proven time after time on here that this is (was) about a $4/hr gig, net after true expenses (worse than McDonalds!) and that was PRE cut. Now, at $.75/mile, you are losing money from the moment you pull out of the driveway!


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## Casuale Haberdasher

kalaks98 said:


> Some people here think that the IRS will give you a $0.57/mile tax credit to your bottom line, this is incorrect.
> When the IRS give you this $0.57/mile expense deduction, it does not go to your bottom line, here is how it works.
> 
> Assume you have an income of $30,000, and you drove 10,000 miles a year for Uber
> so your milage _expense dedcution_ is $5,700 per the IRS (10,000 miles * $0.57)
> The IRS is permiting you to report taxable income of $24,300 (30,000 - 5,700)
> For simplicity, lets assume your effective tax rate is 10%
> So, instead of paying $3,000 in taxes (30,000 * 10%), you are paying $2,430 in taxes (24,300 * 10%),,,,,,,, $570 is the difference!!!!
> Bottom line, for the 10,000 miles you drove for Uber, the IRS is only giving you back a $570 credit to your bottom line, NOT $5,700 !!
> SO, the true expense per mile you can decduct on your bottom line is $0.057/mile ( $570/10,000 miles).......... HALF a CENT per mile.
> You are getting bottom line credit on your taxes of $0.057/mile, NOT $0.57/mile
> 
> Hope everybody get to know this fact.


POST # 1 / KALAKS98: □ □ □ Thank you for
your enthusiastic posting and welcome
to the UP.net Forums. Spend your time,
here, wisely ... by reading at least twice as
much as you post.
I hope you are in the small, nay TINY,
minority of drivers that mistook a well-
known TAX DEDUCTION for a TAX CREDIT.
An appointment with a TAX PROFE$$IONAL
will a$$i$t in these matter$. It's worth it!


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## marketmark

Uber SUCKS for drivers! said:


> Ok, $25/hr after expenses, who you trying to kid? Boy, thats some kinda mystical "Obama math"! I can only think that you left out a decimal point, and meant $2.5/hr ?? Its been proven time after time on here that this is (was) about a $4/hr gig, net after true expenses (worse than McDonalds!) and that was PRE cut. Now, at $.75/mile, you are losing money from the moment you pull out of the driveway!


I am in San Francisco. Our rates are higher and the pings are constant, with plenty of surge.
These numbers are also for 2014 when our rates were even higher and there were fewer drivers.
I haven't driven yet this year and am not sure how much driving I will be doing. From what I hear it is slower due to the season and the fact that there are a lot more drivers out now...
If you are only making $4/hr then it is definitely not worth it...

Also, I cherry pick my hours. A full time driver probably doesn't have that luxury.

Good luck.


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## Salthedriver

This tax crap gives me a headache


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## ShortBusDriver

Salthedriver said:


> This tax crap gives me a headache


Hahaha


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