Lyft Driver Taxes in Arizona - 2025 Guide

Updated for 2025 (Filing 2024 Taxes)

Is Lyft Driver income taxable in Arizona?

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

Federal Requirements: You'll report your Lyft 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).

Arizona Specific Rules: Arizona has a flat income tax rate. For 2024, the rate is 2.5%. Your taxable income (after deductions) will be multiplied by this rate to determine your Arizona income tax liability. Arizona also requires you to report your federal Schedule C income on their state income tax return (Form 140).

Top Tax Write-offs for Lyft Drivers

As a 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 of all miles driven for Lyft, including the date, starting and ending locations, and business purpose. You can't use actual expenses (gas, oil, repairs) and the standard mileage rate – you must choose one.
• Phone Expenses: If you use your phone for Lyft-related activities (navigation, accepting rides, communication with passengers), you can deduct the percentage of your phone bill attributable to business use.
• Lyft-Specific Software & Fees: Any fees paid directly to Lyft, or costs for apps/software used specifically for driving (e.g., tax tracking apps designed for rideshare drivers) are deductible.
• Vehicle Depreciation or Section 179 Deduction: If you own your vehicle, you can deduct depreciation over several years. Alternatively, you might be able to use the Section 179 deduction to deduct a larger portion of the vehicle's cost in the first year (subject to limitations). This is a more complex deduction and often benefits from professional tax advice.

The 15.3% Self-Employment Tax Surprise

Because you're self-employed, you're responsible for both the employer and employee portions of Social Security and Medicare taxes. This combined tax is called Self-Employment Tax and totals 15.3% (12.4% for Social Security up to the annual wage base, and 2.9% for Medicare). You'll calculate this on Schedule SE (Self-Employment Tax).

The good news is you get to deduct one-half of your self-employment tax from your gross income when calculating your Adjusted Gross Income (AGI) on Form 1040. However, it's important to be prepared for this tax, as it's in addition to your regular income tax.

Closing Tip for Arizona Residents

Tax laws can be complex, and it's easy to miss deductions or make errors. Consider using tax software designed for self-employed individuals or consulting with a qualified tax professional, especially if this is your first year driving for Lyft or if your tax situation is complicated. Keeping accurate records of your income and expenses throughout the year will make filing much easier and ensure you pay the correct amount of tax. Don't wait until the last minute – start preparing your taxes early!