Regardless of any other opinions you may have regarding Uber, Lyft, and other ridesharing businesses which effectively act as cheaper, less regulated taxis, one nice thing they do is provide contract work to hundreds of self-employed individuals in metropolises throughout Canada and the United States. Of course, being self-employed means having more control over your budget, and that means having a greater responsibility to get it right.
The Tax Situation Of The Mobility Minded
All of the money you earn through Uber or Lyft counts as taxable income, and that’s whether or not you receive any tax forms from the company. Self-employed contractors don’t get tax refunds since their employers don’t have to set aside payroll taxes, but while a financial advisor would tell you that’s a good thing since you can grow your money instead of having it sit in trust with the government, it also means that you have to set something aside for when tax time comes around.
The Value Of Expense Management Software
And that’s where expense management software can come in handy. Although a self-employed contractor like an Uber driver doesn’t have to submit an expense report to anyone, he or she can use expense management software to keep track of tax deductions for kilometers traveled and other costs related to the job. For instance, in both the United States and Canada you can deduct half the cost of any food or entertainment you provide to others in the course of your job (though your own meals don’t count towards this).
You can also reduce your taxes by the cost of the insurance premiums and interest payments, although there’s a good chance you’ll only be able to recover a percentage based on how much you use your vehicle for work. You also can’t expense a suit so long as it’s suitable for any other context beyond work. In that sense, these expenses operate much like how a home office claim is only valid based on how much space the office takes up and only so long as the office space is used exclusively for work.
Good expense management software can let you keep track of your deductions over the course of the year so that you’ll be able to have a rough estimate of just how much you owe the government when it’s time to pay up. Having this money ready to go means that you won’t have to divert more than you need from any other payments or savings plans you have going, and so you really will be following that financial advice of making your money grow.