Top 7 Delivery Driver Tax Deductions
Whether you are going door-to-door to deliver food or packages, you need to know how to file taxes as a delivery driver. While preparing tax returns you are allowed to deduct business expenses. These ordinary and necessary business spending lower your taxable income. In this article, you will find out the top 7 delivery driver tax deductions.
You can contact your company to find out whether you are an employee or an independent contractor. For instance, all the Dashers driving for Doordash for food deliveries are independent contractors. Here is a list of 7 tax deductions for delivery drivers.
1. Mileage
As a delivery driver, mileage is one of the important deductions you can claim. If you utilize your car for business purposes you are allowed to deduct the costs associated with its ownership and operation. However, you can only deduct the percentage of business-related costs if the car is also for your personal use.
If you use a bike you can claim the expenses related to repair and maintenance along with any necessary accessories you use for work.
To claim the delivery driver tax deductions for mileage you first need to figure out whether you qualify for standard mileage rate or actual expense method. If you are eligible to use both methods then you need to compute which one lowers your taxable income more.
Standard Mileage Rate
You can only use the standard mileage rate if you own or have leased the car. Additionally, you must fulfill the following strict criteria prescribed by the IRS;
- You operate less than 5 cars at the same time.
- You only use the straight-line method to compute and claim the vehicle depreciation.
- You didn't claim a section 179 deduction or any special depreciation allowance for your vehicle.
- You didn't claim the actual expense method after 1997 for your leased car.
Another thing to keep in mind is that if you own a car you must choose a standard mileage rate in the first year you use your vehicle as a delivery driver. Subsequently, you can opt for either of the methods if you qualify to use both.
Alternatively, if you are driving a leased car you are only allowed to use the standard mileage rate for the entire lease period. This includes the renewal period too.
Once you are sure that you are eligible to use the standard mileage rate the only thing you need to do is to keep track of the business miles you drive in a tax year. These can include the miles you have driven between delivery pickups, making the short trip to purchase essential supplies you require to do the job, etc.
At the end of the year, you can multiply the business-related miles with the standard mileage rate prescribed by the IRS, which is 58.5 cents for 2022 to get one of your delivery driver tax deductions.
Actual Expenses Method
If you have driven your car for business and personal purposes the first thing you need to do is to calculate the percentage of business-related car expenses during a tax year to claim the tax deduction.
Let’s say you have used your car 40% of the time for business purposes and you spent around $3000 to operate it. Your allowable deduction will be $1200 ($3000 * 40%).
2. Fees For Roadside Assistance
Subscribing to the services of roadside assistance can be your savior if you have ever experienced a flat tire in the middle of nowhere. The fees you pay to continue utilizing the services of roadside assistance are a deductible expense for the delivery drivers.
You have to apply the business percentage rule here to figure out the exact business-related expenses you are eligible to deduct.
3. Temperature Controlled Bags And Courier Backpacks
When delivering food you need to make sure they are kept at the right temperature to prevent it from going bad. Hot bags serve the purpose so it is one of the essentials for drivers delivering food and are considered a deductible expense.
If you deliver packages and use a backpack to keep your deliverables you may be able to deduct expenses associated with it.
4. Parking And Tolls
Toll fees you pay while you are on your way to deliver a package or food are generally deductible unless they are reimbursed to you. You can write off your work-related parking fees except those that resulted from any kind of violation.
5. Mobile Phone
As a delivery driver, you provide on-demand services which means you require a fully functional phone with lots of data storage to operate. The cost incurred to purchase the phone that you intend to use solely for work is 100% deductible.
All the phone accessories you buy such as chargers, phone holders, and cables also qualify for a deduction. If the phone is partially for your personal use then you will have to apportion the cost incurred.
6. Background Check And Inspection
At times food ordering and delivery platforms require you to get your car inspected. They also might want to run some background checks before they hire you as a delivery driver. The cost associated with fulfilling these essential requirements is deductible.
7. Platform Fees
You might have to use the delivery app and they may charge you a fee. You can write off any fees or commissions you pay to the platform you associate yourself with.
There are more delivery driver tax deductions you can claim. Seek tax advice from a tax specialist to find out which deductions you qualify to claim. If you are hired as an employee then don't forget to report your cash tips of $20 or more earned in a month to your employer.