Lyft Driver Taxes in Massachusetts - 2025 Guide

Updated for 2025 (Filing 2024 Taxes)

Is Lyft Driver income taxable in Massachusetts?

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

Federal Taxes: 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).

Massachusetts Taxes: Massachusetts has a flat income tax rate of 5.0% for 2024. Your net profit from Schedule C will be included in your Massachusetts income calculation, and taxed at this 5.0% rate. You'll file Form MA-1040 to report your state income tax.

Top Tax Write-offs for Lyft Drivers

As a Lyft driver, you can significantly reduce your tax liability by taking advantage of available 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 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 only pay self-employment tax on 92.35% of your net earnings from Schedule C. However, it's a significant tax, so it's important to plan for it. You can also deduct one-half of your self-employment tax from your gross income on Form 1040.

Closing Tip for Massachusetts Residents

Don't wait until the last minute to prepare your taxes! Keeping accurate records of your income and expenses throughout the year will make the filing process much smoother. Consider using accounting software or a dedicated spreadsheet to track your mileage, expenses, and earnings. If you find the process overwhelming, consulting with a qualified tax professional in Massachusetts is always a wise investment. We can help you maximize your deductions and ensure you're compliant with all federal and state tax laws.