On-demand food delivery services, already on a steady rise, have exploded in demand over the past couple of years. Uber Eats, DoorDash, GrubHub, Postmates—the list goes on! Food delivery drivers, especially those in major metro areas, typically don’t have to worry about a shortage of work. However, something they do need to keep in mind is taxes. Luckily, there are quite a few tax deductions for on-demand food delivery drivers to take advantage of this tax season.
Can food delivery drivers take tax deductions?
Food delivery drivers can write off expenses related to their work. You’ll most likely deduct costs related to the business use of your car, phone, and other tools that help you more efficiently deliver meals.
For many of your tax deductions, you’ll need to calculate the amount of time you used the item at hand for business use rather than personal use.
Top Tax Deductions for Food Delivery Drivers
There are six tax deductions that most food delivery drivers can take. However, you can only claim a deduction if a business expense is both ordinary and necessary.
The IRS considers ordinary expenses to be those that are accepted and common in your business or trade. A necessary expense is appropriate and helpful for your business or work.
Make sure you track the expenses you incur throughout the year rather than waiting until the last minute. This will ensure you receive all of the tax deductions that you qualify for.
Take a look at the top six tax deductions for on-demand food delivery drivers!
Given that food delivery drivers often drive all over town making deliveries, it’s no surprise that mileage is one of the most valuable tax deductions.
There are two ways you can deduct mileage for your food delivery business: standard mileage rate or actual expense.
When you’re comparing the two methods, keep in mind the following:
- If it’s your first year using your vehicle for business use, you’ll need to choose the standard mileage rate.
- After the first year, you can choose between the standard mileage rate or the actual expenses.
- If you’re driving a leased vehicle, you must use the standard mileage rate method for the entire lease period, including renewals, if you’ve chosen the standard mileage rate.
For the 2021 tax year, the standard mileage rate is 56 cents per mile driven for business use. If you choose the actual expense method, you’ll determine the costs to operate your vehicle exclusively for business usage.
You can include the actual costs for:
- Depreciation (or lease payments) attributable to the portion of business miles driven
- Registration fees
As a food delivery driver, you can also deduct mileage during your travels to make your deliveries.
You can also deduct mileage driven:
- As you search for your first food delivery pickup
- Between delivery pickups
- For supply purchases needed to do the job
- For work-related errands
- From your last food delivery dropoff back to your home
- With food delivery items in your car to your destination
Second, you can deduct parking costs incurred while delivering meals. However, other potential costs, such as parking, speeding, and traffic violations, aren’t tax-deductible.
You can also claim deductions for parking whether you choose the actual car expenses option or the standard mileage rate option.
3. Phone Expenses
Phone expenses are also tax-deductible. This includes the cost of your phone and your phone bills related to ordinary and necessary parts of your job.
The tax deduction for phone expenses extends to:
- Phone holders
To claim your deduction for phone expenses, you’ll go to Part 5 of Schedule C (Form 1040). You’ll include this expense with other applicable expenses. Then, you’ll write the final amount on line 27a of Schedule C.
Fourth, any fees paid for tolls are also tax-deductible. However, you won’t be able to claim these deductions if toll fees are reimbursed to you. While you can deduct any tolls paid while working, you can’t deduct tolls to and from work.
To prove your toll payments, it’s helpful to have documentation. You can find this in your bank or credit card statements or from receipts if you pay cash.
5. Roadside Assistance
If you find yourself in a jam while making deliveries and need roadside assistance, there’s at least a silver lining: roadside assistance can qualify as a tax deduction. Just remember that the fees paid for roadside assistance programs are tax-deductible based on the percentage of the service that you use for work.
It may also be helpful to track your business miles to figure out the ratio of miles used for business and non-business. This will allow you to determine the deductible amount for your roadside assistance.
6. Health Insurance
Finally, you can claim a deduction for health insurance if:
- You aren’t able to obtain health insurance coverage from an employer or spouse
- You have a business profit
- You’re a self-employed food delivery driver
If you deduct health insurance, you’ll need to consider two things:
- If you receive government subsidies for your health insurance payments, you can deduct only the cost of your bill every month. You can’t deduct the original monthly cost of your health insurance plan.
- If your net business profit for your food delivery business is lower than the cost of your health insurance premiums, you can deduct the amount equal to your business profit.
Maximize Your Tax Deductions for Food Delivery with 1-800Accountant!
Tax deductions for food delivery can be a great way to lower your taxable income. When it’s time to figure out your taxes, work with professionals to ensure you receive the maximum tax deductions. 1-800Accountant tax pros are here for your tax filing and tax preparation needs.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.