Enjoy the Tax Time: Tips for Uber, Lyft & SkipTheDishes Drivers
Tax for Uber and Lyft Drivers – Tips to keep you safe in rideshare and delivery business
Driving for Uber or Lyft offers flexibility, but it also comes with specific tax considerations. Here’s a guide to help you navigate the tax landscape and maximize your returns as a rideshare driver.
Set Aside 25% revenue from Lyft and Uber for Taxes
All earnings from ridesharing are taxable. As an independent contractor, it’s crucial to set aside at least 25% of your net business earnings for taxes. Be proactive to avoid surprises come tax time.
Get a GST/HST Number
From day one, secure a GST/HST number. This is a requirement for rideshare drivers in Canada. Ensure compliance and avoid penalties by obtaining this number early in your rideshare journey.
Know the Difference: Rideshare vs. Food Delivery
Understand the tax implications of being a rideshare driver versus a food delivery courier. The key difference lies in the nature of the service provided — whether it’s transporting passengers (rideshare) or delivering food orders (food delivery). While both involve self-employment income and require tax reporting, the GST/HST requirements and income thresholds may vary between the two activities. The Canada Revenue Agency treats these as distinct business activities, and being aware of the differences can save you headaches during tax season.
Tax Reporting for Uber Eats and Similar Services
If you deliver for an online food ordering service like Uber Eats or SkipTheDishes, GST/HST registration is not mandatory until your income exceeds $30,000. This means you may not need to charge and collect GST/HST until they surpass this income threshold. Know the threshold and plan accordingly.
File Your Uber Lyft Taxes Correctly
To report your income to the Canada Revenue Agency, use Form T2125 – Statement of Business or Professional Activities along with your tax return. Gather all necessary information, including your annual tax summary from the rideshare company, receipts for deductible expenses, and relevant tax documents.
Claim Deductible Expenses
Lower your tax owing by claiming eligible costs. Deductible expenses include app fees, maintenance expenses, lease payments, car washes, and a portion of cell phone expenses. Keep detailed records to maximize your deductions.
GST/HST Considerations
Rideshare Uber and Lyft drivers must adhere to GST/HST tax regulations similar to taxi operators. Charge, collect, report, and remit GST/HST on every fare. Understand the rates applicable in your province and explore the Quick Method for simplified calculations.
By staying informed and adopting these tax-smart practices, you can optimize your earnings as a rideshare driver in Canada. Remember, consulting with a tax professional can provide personalized guidance based on your unique situation.
Drive smart, drive TAX-smart!
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