It’s about time the gig driving community got some news that makes us smile. Gasoline and tons of other items have risen radically in price over the past year or two, and now, finally, there will be some relief. The IRS mileage rate increase for 2023 will definitely put a dent in the amount of taxes drivers have to pay, by boosting the amounts they can take as deductions from gross income. This is some of the best DoorDash, Lyft, and Uber news we’ve heard in awhile.
On December 29, 2022, the IRS announced a 3-cents-per-mile increase in the deductible mileage rate. This takes the gas mileage rate USA 2023 to 65.5 cents per mile. As a result, you get to keep more money in your pocket, possibly making it easier to afford all the other things you need and love in life. If you’re wondering how this compares to past years, 2021 was a mere 56 cents per mile.
The increase was inspired by the skyrocketing cost of fuel, and applies to EVs as well as hybrids and cars powered solely by gasoline. For all vehicles, the mileage deduction applies to miles driven for business purposes only. Drivers, of course, can track their mileage while they are on their shifts with the Gridwise app, to get an accurate count upon which they can base their deductions.
Based on data from Gridwise, consistent rideshare and delivery drivers can expect, on average, to save an extra $151.81 at tax time owing to the increase in the mileage rate. This will amount to about an 8% increase in your deductions, so make sure you track every mile. Learn more about how to put mileage tracking to work for you in this Gridwise blog post.
Here are the numbers, so you can see for yourself how substantial the savings will be:
|On-trip deduction||Off-trip deduction||Total deduction|
|Avg. monthly deduction ’22||$104.82||$51.13||$155.96|
|Avg. monthly deduction ’23||$113.24||$55.37||$168.61|
|Yearly deduction ’22||$1,257.89||$613.60||$1,871.49|
|Yearly deduction ’23||$1,358.90||$664.41||$2,023.31|
Note: Once your business is established, there is the option of actually calculating the cost of using your vehicle for business. But for at least the first year you use your car for gig driving, the IRS says that generally, you will need to use the IRS gas mileage rate to calculate mileage deductions. You can see how you would use the actual expense method, which takes into account gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation in this article from IRS.
Taxes for gig workers: there’s more to know
If you’re an independent contractor and you think that all you have to do in order to comply with your tax requirements is file a return and pay taxes on or around April 15 each year, you need to keep reading. If this is your first year driving, or 2022 was your maiden voyage of sorts, you will be fine if you pay once at traditional tax time. Everyone gets a one-year grace period before they are required to do a bit more.
The “bit more” to 2023 tax news USA is that independent contractors, including gig drivers of all stripes, are expected to pay their taxes quarterly. They still file an actual return on traditional “tax day,” but factored into their total tax bill will be the quarterly payments submitted as estimated taxes throughout the year.
Indeed, paying gig economy taxes is much different from dealing with earnings from full-time corporate jobs. Here are some considerations to take into account.
- Estimating and paying quarterly taxes
To stay within the parameters required by the IRS, drivers who have been driving for more than a year must
- file a tax return for 2022, on or before April 18, 2023
- pay any taxes due for 2022, on or before April 15, 2023
- pay any penalties for inaccurately estimating your taxes, on or before April 15, 2023
- estimate taxes due for 2023
- pay the estimated taxes for the first quarter of 2023, on or before April 15, 2023
- pay estimated taxes for the second quarter of 2023, on or before June 15, 2023
- pay estimated taxes for the third quarter of 2023, on or before September 15, 2023
- pay estimated taxes for the fourth quarter of 2023, on or before January 15, 2024
Keeper Tax, a tax filing service for independent contractors, has a handy calendar that visualizes each deadline.
- Accurately estimating income
You can and will be penalized for inaccurately projecting your income for a given year. The IRS Form 1040-ES can be used to estimate your taxes, but it’s always a good idea to consult with a tax professional to ensure that you’ve set up your estimated taxes properly, and that you’re paying them on time.
Where can you find a reasonably priced tax preparer?
Tax professionals who know their way around gig economy taxes can be there for you with a few taps on the Gridwise app. Powered by Keeper Tax, Gridwise Tax Help gives you access to a professional who can keep you in compliance with tax laws.
- Paying self-employment tax
If you process your gig driving earnings as personal income, you are required to submit self-employment taxes, which are similar to payroll taxes. If you have a Limited Liability Corporation (LLC) or another kind of corporate entity through which you process your earnings, you might be able to save on this expense.
- Paying state income tax
Most states tax the income of residents. It is your responsibility to find out if and how you need to file a return, including whether you need to estimate your taxes and file quarterly as an independent contractor. Do not underestimate the importance of paying state taxes. Like the IRS, your local state department of revenue is likely to have an army of auditors ready to flag your business and demand your payments—along with any penalties they might decide to add.
- Paying county or municipal tax
Many municipal entities, i.e. your city, town, borough, or township, collect earned income tax. You will need to check with your local government’s officials to determine whether this is the case, and find out how you can obtain a form to file your return and pay your taxes. This might not seem like a big deal when you look at it, but failure to pay taxes on the municipal level can put several nasty dents into your credit rating.
- Paying all other taxes
We know. Your head is already spinning, and you wonder how there could possibly be even more taxes to pay. It’s important to know that all the information above applies only to your gig driving income. You will need to consider other items such as estate, gift, sales, and employment taxes you might be required to pay for activities outside of your driving gig.
- Getting the right kind of help
How can you possibly know everything about tax deductions for gig workers, or how to pay self-employment tax? You could study it yourself, of course, but there’s no need to take time off earning money with your gig to do that. It’s always best to get professional help to make sure you get it right.
Gridwise is a great place to start. In addition to mileage tracking and reports on earnings and expenses, the app has helpful resources that will make filing your return and paying your taxes a snap! Gridwise Tax Help provides a service that’s some of the best Amazon Flex, Shipt, Instacart, and Uber news today.
Download Gridwise to get the best mileage tracking app for gig drivers. Not only will you have an accurate account of all the miles you use, you’ll get a ton of other must-have features.
Most important, you’ll get a discount on Gridwise Tax Help, powered by Keeper Tax. With this app designed to prepare gig drivers to accurately and economically file and pay their taxes, you’ll have
- access to your very own tax professional
- automatic receipt tracking
- automatic mileage reporting of shifts tracked with Gridwise
- advanced deduction finder, designed specifically for gig drivers
Regular Gridwise users will get Gridwise Tax Help powered by Keeper Tax at a 20% discount. Those who become Gridwise Plus users get a price reduction of 50%. Now that you know more about taxes for gig workers, there is an avalanche of good reasons to get the help you need. Tax time is coming, so don’t delay!