Lyft Driver Taxes in Alabama - 2025 Guide

Updated for 2025 (Filing 2024 Taxes)

Is Lyft Driver income taxable in Alabama?

Yes, income earned as a Lyft driver is absolutely taxable, both at the federal and Alabama state levels. The IRS considers you self-employed, meaning you're essentially running your own business. You'll report your Lyft income and expenses on Schedule C (Profit or Loss From Business) as part of your federal Form 1040. This schedule calculates your net profit (income minus expenses), which is then factored into your adjusted gross income (AGI).

Alabama has a graduated income tax system, meaning the tax rate you pay increases as your income increases. Your net profit from Lyft, as reported on your federal return, will be used to calculate your Alabama income tax liability. You'll file Alabama Form A-4 to determine your state tax owed. The specific tax brackets for 2024 (filing in 2025) will be available on the Alabama Department of Revenue website (https://revenue.alabama.gov/). It's crucial to accurately report your income to avoid penalties.

Top Tax Write-offs for Lyft Drivers

As a self-employed Lyft driver, you can significantly reduce your tax burden by claiming eligible business expenses. Here are some key deductions:

• Mileage: This is often the largest deduction. For 2024, the standard mileage rate is 67 cents per business mile driven. Keep a detailed log (date, starting/ending location, business purpose, miles driven). You cannot claim mileage if you also deduct actual expenses (like gas and maintenance – see below).
• Vehicle Expenses (Actual Costs): Instead of mileage, you can deduct the actual costs of operating your vehicle, including gas, oil changes, repairs, maintenance, insurance, registration fees, and depreciation. You'll need meticulous records for this method.
• Lyft-Related Software & Apps: Fees paid for ride-hailing apps, GPS navigation, and tax preparation software specifically used for your Lyft business are deductible.
• Phone Expenses: If you use your personal phone for Lyft driving (which is common), you can deduct the percentage of the phone bill attributable to business use. Keep records of your usage.

The 15.3% Self-Employment Tax Surprise

When you're an employee, your employer pays half of your Social Security and Medicare taxes. As a self-employed individual, you're responsible for both the employer and employee portions – a total of 15.3%. This is known as self-employment tax. You'll calculate this on Schedule SE (Self-Employment Tax). The good news is you can deduct one-half of your self-employment tax from your gross income on Form 1040, which helps reduce your overall tax liability. This tax applies to net earnings over $400.

Closing Tip for Alabama Residents

Tax laws can be complex, and it's easy to miss deductions or make errors. I strongly recommend keeping excellent records throughout the year – mileage logs, receipts for all expenses, and income statements from Lyft. Consider using accounting software designed for self-employed individuals. For personalized advice tailored to your specific situation, consulting with a qualified tax professional in Alabama is always a wise investment. The Alabama Department of Revenue website (https://revenue.alabama.gov/) is also a valuable resource.