Lyft Driver Taxes in South Dakota - 2025 Guide

Updated for 2025 (Filing 2024 Taxes)

Is Lyft Driver income taxable in South Dakota?

Yes, your income as a Lyft driver is taxable, but the situation is simpler in South Dakota than in most states. While South Dakota does not have a state income tax, you are still responsible for federal income and self-employment taxes. You'll report your Lyft earnings to the IRS using Schedule C (Profit or Loss From Business) as a self-employed individual. This form is where you’ll detail your income and expenses. The difference between your income and deductible expenses is your net profit, which is then reported on your Form 1040.

Because South Dakota has no state income tax, you won’t file a state income tax return. However, your federal tax obligations remain the same as they would in any other state.

Top Tax Write-offs for Lyft Drivers

As a Lyft driver, you can significantly reduce your tax liability 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 can also deduct parking fees and tolls.
• Vehicle Expenses (Actual Expenses Method): Instead of the standard mileage rate, you can deduct the actual costs of operating your vehicle, such as gas, oil changes, repairs, maintenance, insurance, registration fees, and depreciation. You must choose one method (standard mileage or actual expenses) and be consistent.
• Phone & Data: If you use your phone for Lyft-related activities (navigation, accepting rides, etc.), you can deduct the portion of your phone bill attributable to business use.
• Lyft-Specific Software/Apps: Any fees paid for apps or software directly related to driving for Lyft (e.g., tax tracking apps, driver dashboards) are deductible.

The 15.3% Self-Employment Tax Surprise

Many new Lyft drivers are surprised by self-employment tax. As an employee, your employer pays half of your Social Security and Medicare taxes. As a self-employed individual, you are responsible for both the employer and employee portions, totaling 15.3%. This is calculated on Schedule SE (Self-Employment Tax). However, you only pay self-employment tax on your net earnings (profit) after subtracting your business expenses. You do not pay self-employment tax on earnings below $400. Importantly, you can deduct one-half of your self-employment tax from your adjusted gross income on Form 1040, which helps reduce your overall income tax liability.

Closing Tip for South Dakota Residents

Being a Lyft driver in South Dakota offers the benefit of no state income tax, but diligent record-keeping is crucial for maximizing your federal tax savings. Maintain accurate mileage logs, receipts for all expenses, and consider using accounting software designed for self-employed individuals. Don't hesitate to consult with a qualified tax professional if you have questions or need assistance with your tax filing. Proactive tax planning can save you money and ensure you comply with all IRS regulations.