Tax deductions for delivery drivers, such as those that use Postmates, Doordash, Instacart, or others, are primarily based on vehicle operating costs. Most anyone will qualify for contracting with a delivery service company. To some, it is more appealing than having strangers occupy your vehicle, as is the case for Uber or Lyft. Depending on your market, the income you earn can be pretty attractive. There are certain companies that hire employees to perform delivery/shopping services. This article is aimed towards those whom are considered independent contractors.
As an independent contractor for these delivery services, you have the flexibility to determine your own schedule. You can work as little or as much as you want as a delivery driver. The companies offer a tipping option, which is usually 100% yours to keep. Both Postmates and Doordash make it easy for the user to tip the driver. Your share of the delivery fees and your tips received are considered taxable income. All income must be reported on Schedule C of your tax return. In addition, any referral income you generate is considered taxable income. Expect a Form 1099 at the end of the year that reports your gross earnings to you and to the IRS.
Similar to rideshare drivers, delivery drivers have the option of using the standard mileage rate or the actual expense method for deducting their vehicle costs. The standard mileage rate is simpler and generally results in a higher tax deduction. You must track your mileage driven for the delivery service in a written log. Your deduction would be equal to your business miles driven multiplied by the standard mileage rate (53.5 cents for 2017 and 54.5 cents for 2018). The mileage driven when you are out for deliveries is deductible.
It is important to note that the standard mileage rate is only available for cars. If you use a motorcycle, bike, public transportation, etc. to make your deliveries, you must track your actual costs. In NYC, for example, you could deduct the cost of your Metro pass if you purchased it for Postmates, Doordash, Instacart, etc. If you own a bike, you could deduct the cost of a seat basket or similar item. For a motorcycle, track and keep your receipts for items such as gas, repairs, oil changes, insurance, and others.
Other expenses that could apply to delivery drivers include:
- Food handling items, such as ice bags or heating packs
- Food or drink storage baskets
- Parking and tolls
- Portion of your cell phone bill if you use an app to make deliveries (business use portion would be deductible)
- Tax prep fees
Be sure to check out my Ultimate Guide to Rideshare Tax Deductions for other ideas that may apply. Not sure what to deduct? Need help with your taxes? Contact me today.