Lyft Driver Taxes in Minnesota - 2025 Guide

Updated for 2025 (Filing 2024 Taxes)

Is Lyft Driver income taxable in Minnesota?

Yes, absolutely. Income earned as a Lyft driver is taxable at both the federal and Minnesota state levels. The IRS considers you self-employed, meaning you're essentially running your own business. This has implications for how you report your income and pay taxes.

Federal Requirements: You'll report your Lyft income on Schedule C (Profit or Loss From Business) as part of your Form 1040. This form is where you detail your earnings and, crucially, your deductible business expenses. The profit (or loss) calculated on Schedule C then flows to your main tax return (Form 1040).

Minnesota Specific Rules: Minnesota has a graduated income tax system. This means the tax rate you pay increases as your taxable income increases. Your Lyft income, after deducting business expenses on Schedule C, will be added to your other income (like wages from a traditional job) to determine your total taxable income for Minnesota. Minnesota also has its own version of Schedule C, Form M1, which may require additional reporting depending on your situation. You'll use the Minnesota tax rates based on your income bracket to calculate your state income tax liability.

Top Tax Write-offs for Lyft Drivers

As a Lyft driver, you're entitled to deduct legitimate 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 can't use actual expenses (gas, oil, repairs) if you take the standard mileage rate.
• Vehicle Expenses (Alternative to Mileage): Instead of the standard mileage rate, you can deduct the actual costs of operating your vehicle. This includes gas, oil changes, repairs, maintenance, insurance, registration fees, and depreciation. This method requires meticulous record-keeping and is often more complex.
• Lyft-Related Software & Apps: Fees paid for ride-hailing apps, GPS navigation apps, or tax preparation software specifically used for your Lyft business are deductible.
• Phone Expenses: If you use your personal phone for Lyft driving (which is common), you can deduct the percentage of the phone bill attributable to business use. Keep records of your usage to support this deduction.

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 tax on Schedule SE (Self-Employment Tax). The good news is you only pay self-employment tax on your profit (income minus expenses) from Schedule C, and only on earnings over $400. You do get to deduct one-half of your self-employment tax from your gross income on Form 1040, which helps reduce your overall tax liability.

Closing Tip for Minnesota Residents

Navigating self-employment taxes can be complex. I strongly recommend keeping meticulous records of all your income and expenses throughout the year. Consider using accounting software designed for freelancers or consulting with a qualified tax professional (like myself!) who understands the specific nuances of Minnesota tax law and the gig economy. Proactive tax planning can save you money and headaches come tax season. Good luck, and safe driving!