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Driving for a Rideshare
A side hustle is becoming more and more common these days. It’s a great way to make some spending money or to add to your savings. A popular option has become driving an Uber or Lyft. It seems great on paper, but Bankrate.com urges you to understand just what you are getting into.
First, make sure that ridesharing is legal where you live. Some states and cities either ban ridesharing altogether or place restrictions on it, so check your local ordinances before you start.
Also, check your insurance coverage. Most car insurance for a personal vehicle does not cover you if you are using your vehicle for a commercial purpose, such as driving for a rideshare. Some rideshare companies offer limited coverage, but make sure you understand the limits. And some insurers offer policies specifically for rideshare drivers.
Don’t make the mistake of simply not informing your insurance company. If you are involved in an accident, the insurer might deny your claim. That could leave you liable not only for fixing your car, but also for any damages you caused in the accident.
Next, decide how you want to approach the job. Most people who work for a rideshare company also have another job. In fact, you probably can make more money if you drive only at night and on weekends rather than all day. Rates are usually higher at night and on weekends, and there are more people who need a ride.
You can sign up to drive for more than one rideshare company. However, they often have different requirements, so make sure you meet the requirements of every company for which you drive.
Don’t forget about the toll that rideshare driving can take on your car. You probably will be driving a lot more miles than you would otherwise, and much of it is likely to be in traffic, since rideshares are more common in cities. You will need to do more maintenance on your car, and you probably will have to spring for big-ticket repairs, such as new brakes, more often than you would otherwise.
Finally, don’t forget about the tax man. When you drive for a rideshare company, you are an independent contractor. That means that there are no deductions from your paycheck, so getting your taxes to the IRS in time is on you.
You should keep track of the expenses connected with driving. You can keep a list of the gas, tolls, maintenance, etc. But remember that you can only count these expenses if they are directly related to your ridesharing. An easier option for most people is to take the IRS standard deduction for business driving. Keep track of the miles you drive in your job, and then multiply that by the mileage deduction, which you can find at www.irs.gov.
Your employer will send you a 1099 form with the amount of money you have been paid. They will also report that income to the IRS, so don’t even think about under-reporting or not reporting at all. Since you are self-employed, you also have to pay self-employment taxes. And if you make a lot of money, you might need to make quarterly tax payments.