Top Tax Time Tips for Rideshare and Delivery Drivers

A KKCPA Guide to Ontario Tax and Financial Strategies for Gig Workers

The gig economy is booming, and with it, more and more people are considering becoming rideshare or delivery drivers to make extra money or even turn it into a primary career. The flexibility and potential income are attractive, but it’s important to understand that driving for services like Uber, Lyft, DoorDash, or SkipTheDishes puts you squarely into the self-employed category. This means additional tax responsibilities and a need for proactive financial planning.

At KKCPA, we want to help Ontario’s rideshare and delivery drivers navigate tax season confidently and set themselves up for financial health. In this blog post, we’ll cover key tax tips, explain important deductions, and provide insights designed to keep more of your hard-earned money in your pocket.

Understanding Your Income and Taxes

Independent Contractor: As a rideshare or delivery driver, you’re not an employee of the platform companies. This means you’re an independent contractor or a “small business.” Canadian tax laws dictate the treatment of your income and expenses and create specific obligations at tax time.

Two Main Tax Types

There are two main taxes you’ll likely encounter:

• Income Tax: Paid to the federal and provincial governments, on your net income (what you earn after deductions).
• HST: Harmonized Sales Tax, usually 13% in Ontario; you’ll likely need to collect and remit HST if you earn enough.

1099 Forms: Don’t expect a T4 slip from your rideshare and delivery companies. If you meet specific earnings thresholds, expect a statement outlining your income (sometimes called a 1099 form).

Estimated Tax Payments: Since taxes aren’t withheld from your pay, you might need to make quarterly tax installments to avoid penalties.

Know Your Deductions!

As a small business owner – that’s what you are – you have the power to lower your tax bill by claiming legitimate business expenses. Here are the major ones rideshare and delivery drivers should know:

• Vehicle Expenses: This is likely your biggest deductible category. Choose between two methods:
• Standard Mileage Rate: Track your business mileage carefully and use the CRA’s yearly mileage rate to calculate your deduction. This method is often simpler, especially if you drive a fairly standard, fuel-efficient vehicle.
• Actual Expense Method: Track gas, repairs, maintenance, insurance, lease payments, etc. This can be more advantageous if you have high car-related costs, maybe due to an older vehicle or a specialized car required by some platforms.
• Cell Phone and Data Plan: Since communication is vital to your gig job, you can likely deduct a percentage of these costs based on business use. Keep good records of how often you use your phone for ride bookings, customer communication, and GPS navigation to determine the deductible percentage.
• Tolls and Parking: Expenses directly incurred for work are typically deductible. So, if you pay for tolls while heading to pick up a passenger or parking fees while waiting for delivery orders, these can be claimed.
• Fees and Commissions: Amounts charged by delivery and rideshare companies can be deducted. These fees are a direct cost of doing business and reduce your taxable income.
• Supplies: Items like phone mounts, bottled water for passengers, insulated bags for food delivery, etc., could be considered business expenses. Be sure these items are primarily for your rideshare or delivery work to justify the deduction.
• Home Office: If you have a dedicated workspace used specifically for administrative tasks related to your driving job, you may be able to claim a portion of home expenses. This is a complex area, so consider professional tax advice to maximize these deductions correctly and avoid potential issues with the CRA.

GST/HST Considerations

Registering for HST: If you exceed $30,000 in gross revenue (before expenses) over four consecutive quarters, you MUST register to collect and remit HST. You can register voluntarily even if under the limit.

Benefits of Registering: Once registered, you can claim back HST paid on business expenses (called Input Tax Credits, or ITCs), offsetting what you owe.

Threshold Note: The $30,000 threshold applies to your total income from all self-employment sources, not just rideshare or delivery driving.

Savvy Financial Strategies for Rideshare and Delivery Drivers

• Track Everything: Develop a system for meticulously tracking income and expenses. Use apps, spreadsheets, or a simple notebook, but be consistent and organized. There are many expense tracking apps designed for the gig economy – explore to find one that suits your style.
• Separate Accounts: Create a dedicated business bank account and credit card to simplify tracking and separate personal and business finances. This makes tax time easier and gives you a clearer snapshot of how your driving business is actually doing.
• Retirement Savings: It’s easy to focus on the present, but self-employed people need to prioritize their future too. Set aside money in a TFSA or RRSP regularly. Even small contributions early on can make a huge difference over time due to compound interest.
• Emergency Funds: Unexpected car repairs or periods of low work can be stressful. Build up a cash cushion as quickly as possible. Aim to have 3-6 months of basic living expenses saved to manage potential income fluctuations inherent in gig work.

Beyond the Basics: These strategies create a solid foundation. Additional areas to explore for maximizing your financial position include:

• Tax Professionals: A knowledgeable accountant can save you far more money than their fees.
• Insurance: Talk to your insurance provider about rideshare/delivery endorsements to ensure proper coverage.
• Financial education: Read blogs, listen to podcasts, and learn about personal finance for self-employed individuals.

Navigating Taxes and Finances Doesn’t Have to Be a Bumpy Ride

While the flexibility of rideshare and delivery gigs is great, the tax and financial complexities can feel overwhelming. KKCPA understands the unique needs of Ontario’s self-employed drivers. We’re committed to helping you maximize your deductions, stay compliant with the CRA, and create a sound financial future.

Whether you need help sorting out your tax forms, want to discuss a proactive savings strategy, or simply have questions, we’re here to guide you.

Reach out to KKCPA for a personalized consultation. Let us simplify your tax worries and help you keep more of your hard-earned income. Contact us today to get started.