Lyft Driver Taxes in Illinois - 2025 Guide

Updated for 2025 (Filing 2024 Taxes)

Is Lyft Driver income taxable in Illinois?

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

Federal Taxes: You'll report your Lyft income on Schedule C (Profit or Loss From Business) as part of your Form 1040. This form allows you to deduct business expenses (more on that below) to arrive at your taxable profit. 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). However, you are legally obligated to report all income, even if you don't receive a 1099-K.

Illinois Taxes: Illinois has a flat income tax rate of 4.95% for the 2024 tax year (filing in 2025). Your taxable income, after deductions from Schedule C, will be subject to this rate. You'll report your Schedule C profit on Illinois Form IL-1040.

Top Tax Write-offs for Lyft Drivers

As a Lyft driver, you can significantly reduce your tax liability 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 odometer readings, purpose of trip) to substantiate your mileage. You can use apps to help with this.
• Vehicle Expenses (Alternative to Mileage): Instead of the standard mileage rate, you can deduct the actual expenses of operating your vehicle (gas, oil changes, repairs, insurance, registration, depreciation). This requires meticulous record-keeping and is often less beneficial than the mileage rate, but may be advantageous in certain situations.
• 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 showing how much time your phone is used for work.
• Ride-Sharing Apps Fees & Subscriptions: Fees paid to Lyft, as well as any subscription costs for apps that help you track mileage or manage your driving business, 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 called Self-Employment Tax and is currently 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 adjusted gross income on Form 1040, which reduces your overall tax burden. This tax applies to earnings over $400.

Closing Tip for Illinois Residents

Don't wait until the last minute to prepare your taxes! Keeping accurate records throughout the year – mileage logs, expense receipts, and income statements – will make the process much smoother and help you maximize your deductions. Consider using accounting software designed for self-employed individuals. If you're unsure about any aspect of your tax obligations, consulting with a qualified tax professional in Illinois is always a wise investment.