Lyft Driver Taxes in Michigan - 2025 Guide

Updated for 2025 (Filing 2024 Taxes)

Is Lyft Driver income taxable in Michigan?

Yes, absolutely. Income earned as a Lyft driver is taxable at both the federal and Michigan state levels. The IRS considers you self-employed, meaning you're essentially running your own business. You'll report your Lyft income and expenses on Schedule C (Profit or Loss From Business) as part of your federal Form 1040. This schedule calculates your net profit (income minus expenses), which is then added to your other income to determine your adjusted gross income (AGI).

Michigan has a flat income tax rate of 4.05% for 2024. Your net profit from Schedule C will be included in your Michigan income tax calculation. Because Michigan has a flat tax, there are fewer brackets to worry about – your entire taxable income is taxed at this single rate. You'll use Michigan Form MI-1040 to file your state income tax return.

Top Tax Write-offs for Lyft Drivers

As a Lyft driver, you're entitled to deduct business expenses to reduce your taxable income. Here are some key deductions:

• Mileage: This is often the biggest 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 this rate for commuting to/from your regular place of business (if you have one) or for personal trips.
• Vehicle Expenses (Alternative to Mileage): Instead of the standard mileage rate, you can deduct the actual expenses of operating your vehicle, such as gas, oil changes, repairs, insurance, registration fees, and depreciation. This requires meticulous record-keeping and is often more complex than using the standard mileage rate. You generally need to choose one method (standard mileage or actual expenses) and stick with it for the life of the vehicle.
• Lyft-Related Software & Apps: Fees paid for ride-hailing apps, GPS navigation apps, and tax preparation software specifically used for your Lyft business are deductible.
• Phone Expenses: If you use your personal phone for Lyft driving, you can deduct the percentage of the phone bill attributable to business use. Keep records of your usage to support this deduction. (e.g., time spent using the phone for Lyft vs. personal use).

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 get to deduct one-half of your self-employment tax from your gross income. This helps reduce your overall tax liability. However, be prepared for this additional tax – it's a significant part of being self-employed.

Closing Tip for Michigan Residents

Don't wait until the last minute to organize your Lyft income and expense records! Consistent record-keeping throughout the year will save you significant time and potential headaches during tax season. Consider using a dedicated app or spreadsheet to track your mileage, expenses, and income. If you're unsure about any aspect of your tax obligations, consulting with a qualified tax professional in Michigan is always a wise investment.