Lyft Driver Taxes in Vermont - 2025 Guide

Updated for 2025 (Filing 2024 Taxes)

Is Lyft Driver income taxable in Vermont?

Yes, income earned as a Lyft driver is absolutely taxable, both at the federal and Vermont state levels. As an independent contractor, you're considered self-employed by the IRS and the State of Vermont. This means you'll need to report your earnings and pay taxes accordingly.

Federal Requirements: 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). The official 2024 standard mileage rate for business use is 67 cents per mile. You can choose to deduct either actual expenses or the standard mileage rate – generally, the standard mileage rate is simpler and often results in a larger deduction, especially if you have significant vehicle expenses.

Vermont Specific Rules: Vermont 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 any) to determine your total taxable income for Vermont. Vermont also requires you to file a state income tax return (Form INC) to calculate your Vermont income tax liability. Vermont generally follows federal adjusted gross income (AGI) as a starting point, but has its own adjustments and deductions.

Top Tax Write-offs for Lyft Drivers

Maximizing your deductions is key to minimizing your tax bill. Here are some common deductions for Lyft drivers:

• Mileage: As mentioned, you can deduct 67 cents per mile driven for business purposes (Lyft driving). Keep a detailed mileage log! Apps like Stride Tax or Everlance can help.
• Vehicle Expenses (Alternative to Mileage): If you choose not to use the standard mileage rate, you can deduct actual vehicle expenses like gas, oil changes, repairs, insurance, registration fees, and depreciation. You must keep detailed records of these expenses.
• Phone Expenses: You can deduct the portion of your cell phone bill that is used for business. If you use your phone solely for Lyft driving, you can deduct the entire bill. Otherwise, you'll need to calculate the business use percentage.
• Lyft-Related Software & Fees: Expenses for apps or services specifically used for managing your Lyft business (like tax preparation software designed for gig workers) are deductible. Lyft's driver fees are also deductible.

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). However, you only pay self-employment tax on your net profit (after deducting business expenses). Also, you can 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 Vermont Residents

Tax laws can be complex, and it's easy to miss deductions. Consider consulting with a qualified tax professional, especially if this is your first year driving for Lyft or if your tax situation is complicated. Vermont offers resources on its Department of Taxes website (https://tax.vermont.gov/). Keeping excellent records throughout the year – mileage logs, expense receipts, and income statements – will make filing your taxes much smoother and ensure you're paying the correct amount. Good luck, and safe driving!