Lyft Driver Taxes in Colorado - 2025 Guide

Updated for 2025 (Filing 2024 Taxes)

Is Lyft Driver income taxable in Colorado?

Yes, income earned as a Lyft driver is absolutely taxable, both at the federal and Colorado state levels. As an independent contractor, you're considered self-employed by the IRS and the Colorado Department of Revenue.

Federal Requirements: You'll report your Lyft income on Schedule C (Profit or Loss from Business) as part of your Form 1040. This form details your earnings and allows you to deduct business expenses (more on that below). Lyft will send you a Form 1099-K detailing your earnings if you meet certain thresholds (generally $20,000 in payments and more than 200 rides). Even if you don't receive a 1099-K, you are still legally obligated to report all income.

Colorado Specific Rules: Colorado has a flat income tax rate of 4.40% for the 2024 tax year (filing in 2025). This means all your taxable income, after deductions, will be taxed at this single rate. You'll report your federal adjusted gross income (AGI) on your Colorado state income tax return (Form DR 0104) and calculate your Colorado taxable income. Colorado also requires you to report your self-employment income, which impacts your state income tax liability.

Top Tax Write-offs for Lyft Drivers

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

• Mileage: This is often the biggest 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 can use apps like Stride or Everlance to track this automatically. You cannot claim mileage if you use the actual expense method (see below).
• Vehicle Expenses (Actual Expense Method): Instead of mileage, you can deduct the actual costs of operating your vehicle, such as gas, oil changes, repairs, insurance, registration fees, and depreciation. You'll need meticulous records. Generally, the mileage rate is more beneficial, but compare both methods to see which yields a larger deduction.
• Phone & Data: If you use your phone for Lyft-related activities (navigation, accepting rides, communication), you can deduct the portion of your phone bill attributable to business use. Keep records of usage.
• Lyft-Specific Software/Apps: Costs for apps or software directly used for driving (e.g., tax tracking apps, dashcam software) are deductible.

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 15.3% on earnings over $400. This is reported on Schedule SE (Self-Employment Tax). The good news is you can deduct one-half of your self-employment tax from your adjusted gross income, which lowers your overall tax liability. Don't be alarmed when you see this tax – it's a normal part of being self-employed!

Closing Tip for Colorado Residents

Tax laws can be complex, and it's easy to miss deductions. Consider consulting with a qualified tax professional, especially if this is your first year driving for Lyft or if your tax situation is complicated. Keeping excellent records throughout the year (mileage logs, receipts, etc.) will save you time and money when filing your taxes. The Colorado Department of Revenue website (https://www.colorado.gov/revenue) is a great resource for state-specific tax information.