Lyft Driver Taxes in Indiana - 2025 Guide

Updated for 2025 (Filing 2024 Taxes)

Is Lyft Driver income taxable in Indiana?

Yes, income earned as a Lyft driver is absolutely taxable, both at the federal and Indiana state levels. As an independent contractor, you are considered self-employed by the IRS and the Indiana 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).

Indiana Specific Rules: Indiana has a flat income tax rate of 3.15% for 2024. Your net profit from Schedule C will be included in your Indiana Adjusted Gross Income (AGI), and this amount will be subject to the 3.15% tax. Indiana also has a standard deduction, which can reduce your taxable income. You'll file Form IT-1040 to report your Indiana income tax.

Top Tax Write-offs for Lyft Drivers

As a Lyft driver, you can significantly reduce your tax liability by taking advantage of various deductions. Here are some key write-offs:

• 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 cannot use mileage if you previously claimed depreciation on the vehicle.
• Vehicle Expenses (Alternative to Mileage): Instead of mileage, 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 results in a larger deduction, but compare both methods to see which is best for you.
• Lyft-Related Software & Apps: Expenses for apps or software used specifically for driving (e.g., tax tracking apps, driver optimization tools) are deductible.
• Phone Expenses: You can deduct the portion of your cell phone bill that is attributable to your Lyft driving activities. If you use your phone for both personal and business purposes, you can only deduct the business portion.

The 15.3% Self-Employment Tax Surprise

Because you're self-employed, you're responsible for paying 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 and 2.9% for Medicare). You only pay self-employment tax on earnings over $400.

You'll calculate this tax on Schedule SE (Self-Employment Tax), which is filed along with your Form 1040. The good news is that you can deduct one-half of your self-employment tax from your gross income when calculating your AGI.

Closing Tip for Indiana 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 in your first year as a Lyft driver. Keeping meticulous records of your income and expenses throughout the year will make filing your taxes much easier and ensure you're paying the correct amount. The Indiana Department of Revenue website (https://www.in.gov/dor/) is a great resource for state-specific tax information.