Lyft Driver Taxes in New Jersey - 2025 Guide

Updated for 2025 (Filing 2024 Taxes)

Is Lyft Driver income taxable in New Jersey?

Yes, income earned as a Lyft driver is absolutely taxable, both at the federal and New Jersey state levels. The IRS considers you self-employed, not an employee of Lyft. 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). It's crucial to keep accurate records of both your income and expenses throughout the year.

New Jersey State Taxes: New Jersey has a graduated income tax system. This means the tax rate you pay increases as your income increases. Your net profit from Schedule C will be added to your other income (like wages from a traditional job, if applicable) to determine your total taxable income for New Jersey. New Jersey will then apply the appropriate tax bracket to calculate your state income tax liability. You'll use Form NJ-1040 to file your New Jersey state income tax return.

Top Tax Write-offs for Lyft Drivers

As a self-employed 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 mileage log (date, starting/ending location, business purpose) to substantiate your claim. You can't use actual expenses (gas, oil, repairs) and the standard mileage rate – you must choose one.
• Vehicle Expenses (Alternative to Mileage): If you choose not to use 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.
• Lyft-Related Software & Apps: Expenses for apps or software directly used for driving (e.g., tax tracking apps, GPS navigation) are deductible.
• Phone Expenses: You can deduct the portion of your cell phone bill that is directly related 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 get to deduct one-half of your self-employment tax from your adjusted gross income on Form 1040, which can lower your overall tax bill. However, be prepared for this additional tax liability – it's a common surprise for first-time self-employed individuals. Self-employment tax applies to net earnings over $400.

Closing Tip for New Jersey Residents

Navigating taxes as a Lyft driver can be complex. I strongly recommend keeping meticulous records of all income and expenses throughout the year. Consider using accounting software or a dedicated tax app designed for gig workers. Don't hesitate to consult with a qualified tax professional (like myself!) to ensure you're maximizing your deductions and complying with all federal and New Jersey state tax laws. Proper planning can save you significant money and stress during tax season. Good luck and safe driving!