Lyft Driver Taxes in Rhode Island - 2025 Guide

Updated for 2025 (Filing 2024 Taxes)

Is Lyft Driver income taxable in Rhode Island?

Yes, income earned as a Lyft driver is absolutely taxable, both at the federal and Rhode Island state levels. The IRS considers you self-employed, meaning you're essentially running your own small 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 factored into your adjusted gross income (AGI).

Rhode Island has a graduated income tax system. This means the tax rate you pay increases as your income increases. Your net profit from Lyft, as reported on your federal return, will be included in your Rhode Island taxable income. You’ll file a Rhode Island Form RI-1040 to calculate your state income tax liability. Rhode Island also requires you to pay estimated taxes quarterly if you expect to owe $1,000 or more in state income tax for the year. More information can be found on the Rhode Island Division of Taxation website: https://www.tax.ri.gov/

Top Tax Write-offs for Lyft Drivers

As a self-employed Lyft driver, you can significantly reduce your tax burden by claiming eligible business expenses. Here are some key deductions:

• 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 the standard mileage rate if you've previously claimed depreciation on your 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. This requires meticulous record-keeping. Generally, the mileage method yields a larger deduction, but compare both methods to see which benefits you most.
• Lyft-Related Software & Apps: Fees paid for ride-hailing apps, GPS navigation, and tax preparation software specifically used for your Lyft business are deductible.
• Phone Expenses: If you use your personal phone for Lyft-related activities (navigation, accepting rides, etc.), you can deduct the percentage of the phone bill attributable to business use. Keep records of your usage.

The 15.3% Self-Employment Tax Surprise

When you're an employee, your employer pays half of your Social Security and Medicare taxes. As a self-employed individual, you're responsible for both the employer and employee portions, totaling 15.3%. This is known as self-employment tax. You'll calculate this on Schedule SE (Self-Employment Tax), which is filed with your Form 1040. However, you get to deduct one-half of your self-employment tax from your gross income, which can help lower your overall tax liability. The 15.3% applies to net earnings over $400.

Closing Tip for Rhode Island 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, especially given Rhode Island’s graduated income tax system. Proactive tax planning can help you avoid surprises and maximize your deductions. Don't hesitate to seek professional guidance to ensure you're compliant with both federal and Rhode Island tax laws.