Uber Driver Taxes in Alabama - 2025 Guide

Updated for 2025 (Filing 2024 Taxes)

Is Uber Driver income taxable in Alabama?

Yes, income earned as an Uber driver is absolutely taxable, both at the federal and Alabama state levels. As an independent contractor, you are considered self-employed by the IRS and the Alabama Department of Revenue. This means you're responsible for reporting all earnings and paying the associated taxes.

Federal Taxes: You'll report your Uber income and expenses on Schedule C (Profit or Loss From Business), which is filed with your Form 1040. This form calculates your net profit (income minus expenses). The net profit is then added to your other income when calculating your Adjusted Gross Income (AGI).

Alabama State Taxes: Alabama has a graduated income tax system. This means the tax rate you pay increases as your income increases. Your Uber net profit, as calculated on your federal Schedule C, will be included in your Alabama income tax calculation (Form 40NR). You'll use the Alabama tax brackets for the 2024 tax year (filing in 2025) to determine your state income tax liability. The specific brackets are available on the Alabama Department of Revenue website (revenue.alabama.gov).

Top Tax Write-offs for Uber Drivers

As a self-employed Uber driver, you can significantly reduce your tax liability 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 of all miles driven for Uber, including the date, starting and ending locations, and business purpose. You cannot use the standard mileage rate if you've previously claimed depreciation on your vehicle.
• Vehicle Expenses (Alternative to Mileage): Instead of the standard mileage rate, you can deduct the actual expenses of operating your vehicle, such as gas, oil changes, repairs, insurance, registration fees, and depreciation. You must keep detailed records of all these expenses. Generally, the mileage method yields a larger deduction, but compare both methods to see which benefits you most.
• Uber Fees & Commissions: The fees Uber charges for using their platform are deductible. This is typically shown on your 1099-K form.
• Smartphone & Data Plan: If you use your smartphone primarily for Uber driving, you can deduct the portion of your phone bill and data plan that relates to business use. Keep records to support the business use percentage.

The 15.3% Self-Employment Tax Surprise

Many Uber drivers are surprised to learn about self-employment tax. 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, totaling 15.3%. This is calculated on Schedule SE (Self-Employment Tax). However, you only pay self-employment tax on 92.35% of your net earnings. The good news is that you can deduct one-half of your self-employment tax from your gross income on Form 1040, which reduces your overall tax liability.

Remember, self-employment tax applies to earnings over $400.

Closing Tip for Alabama Residents

Navigating taxes as an Uber driver can be complex. I strongly recommend keeping meticulous records of all income and expenses throughout the year. Consider using accounting software or a spreadsheet to track your mileage, expenses, and earnings. Don't hesitate to consult with a qualified tax professional, like myself, to ensure you're taking all eligible deductions and complying with both federal and Alabama tax laws. Proper planning can save you significant money and avoid potential issues with the IRS or the Alabama Department of Revenue.