Lyft Driver Taxes in Alaska - 2025 Guide

Updated for 2025 (Filing 2024 Taxes)

Is Lyft Driver income taxable in Alaska?

Yes, your income as a Lyft driver is taxable, but the situation in Alaska is unique. While Alaska has no state income tax, you are still responsible for federal income tax and self-employment tax on your earnings. The IRS considers you self-employed, meaning you operate as an independent contractor, not an employee of Lyft.

You will report your Lyft income and expenses on Schedule C (Profit or Loss From Business) when you file your federal income tax return (Form 1040). Schedule C is where you calculate your net profit – your gross earnings minus your business expenses. This net profit is then added to your other income (like wages from a traditional job) to determine your overall taxable income.

Because Alaska does not have a state income tax, you will not file a state income tax return. However, accurate federal reporting is crucial.

Top Tax Write-offs for Lyft Drivers

As a Lyft 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 mile for business use. Keep a detailed log of all miles driven for Lyft, including the date, starting and ending locations, and purpose (passenger pick-up/drop-off, driving to pick up a passenger, etc.). You cannot include commuting miles.
• 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. This requires meticulous record-keeping and is often more complex than using the standard mileage rate. You generally need to choose one method (mileage or actual expenses) and stick with it.
• Phone & Data: If you use your phone for Lyft-related activities (navigation, accepting rides, communication with passengers), you can deduct the portion of your phone bill attributable to business use. Keep records showing how much time your phone is used for Lyft.
• Ride-Sharing Apps & Software: Fees paid to Lyft, as well as the cost of any tax preparation software specifically used for your driving income, are deductible.

The 15.3% Self-Employment Tax Surprise

Many 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 – a total of 15.3%. This is calculated on Schedule SE (Self-Employment Tax).

You only pay self-employment tax on your net profit (after deducting business expenses). However, you do get to deduct one-half of your self-employment tax from your gross income on Form 1040, which helps reduce your overall income tax liability.

The self-employment tax applies to earnings over $400. If your net earnings are less than $400, you won't owe self-employment tax, but you still need to report your income.

Closing Tip for Alaska Residents

While the lack of state income tax in Alaska is a benefit, don’t underestimate the importance of accurate federal tax filing as a Lyft driver. Maintaining detailed records of your mileage, expenses, and income throughout the year will save you time and potential headaches when tax season arrives. Consider using accounting software designed for independent contractors or consulting with a qualified tax professional to ensure you’re maximizing your deductions and complying with all IRS regulations. Good luck, and safe driving!