Lyft Driver Taxes in Washington - 2025 Guide

Updated for 2025 (Filing 2024 Taxes)

Is Lyft Driver income taxable in Washington?

Yes, your income as a Lyft driver is taxable, but the specifics differ between federal and Washington state. Federally, the IRS considers you self-employed. This means you’ll report your earnings and expenses on Schedule C (Profit or Loss from Business) as part of your Form 1040. You’re essentially running your own small business, and the IRS requires you to report profits (income minus expenses).

Washington State is unique – it does not have a state income tax. However, this doesn’t mean your Lyft income is tax-free! While you won’t file a Washington state income tax return, you may be subject to Washington’s 7% Capital Gains tax if your total long-term capital gains exceed $250,000. Lyft driving generally generates ordinary income, not capital gains, unless you are selling a vehicle used for driving and have held it for more than a year. It's crucial to understand the difference. Consult a tax professional if you believe your Lyft activity might trigger the capital gains tax.

Top Tax Write-offs for Lyft Drivers

As a self-employed Lyft driver, you can significantly reduce your tax liability by claiming eligible business expenses. 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 (date, starting/ending location, business purpose, miles driven). You can use apps like Stride or Everlance to track this automatically.
• Vehicle Expenses (Alternative to Mileage): Instead of mileage, you can deduct the actual expenses of operating your vehicle (gas, oil changes, repairs, insurance, registration, depreciation). This requires meticulous record-keeping and is often less beneficial than the standard mileage rate, but may be advantageous if you have significant vehicle expenses.
• Phone & Data: If you use your phone for Lyft-related activities (navigation, accepting rides, communication), you can deduct the portion of your phone bill attributable to business use. Keep records showing how much time your phone is used for Lyft.
• Ride-Sharing Apps Fees & Subscriptions: Fees paid to Lyft, as well as subscriptions to apps that help you manage your driving (tax trackers, mileage logs), are deductible business expenses.

The 15.3% Self-Employment Tax Surprise

Because you're self-employed, you're responsible for 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). You only pay self-employment tax on profits over $400. The good news is you can deduct one-half of your self-employment tax from your adjusted gross income on Form 1040, which reduces your overall tax burden.

Closing Tip for Washington Residents

Navigating taxes as a Lyft driver can be complex, even in a state without income tax. While Washington doesn’t have a state income tax return, accurate record-keeping is essential for maximizing your federal deductions and understanding potential capital gains implications. Consider using accounting software or consulting with a qualified tax professional, especially if you have a complex tax situation. Proactive tax planning can save you money and stress during filing season!