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Court Approves Vehicle Tax Deductions For Gigs Like Uber, Door Dash

Court Approves Vehicle Tax Deductions For Gigs Like Uber, Door Dash

A court has approved vehicle-related tax deductions for side jobs like Uber and Door Dash in a major ruling for the gig economy.

In the recent court case, Gonzalez v. Comm’r, it was ruled that vehicular expenses incurred for any "side hustle" are tax deductible under certain circumstances.

A summary of this specific case notes that the petitioner lived in Palo Alto, California where she worked full-time. She also, however, had an interest in designing children's clothing and would "would drive from Palo Alto to a workshop in southern California, a trip of around 400 miles one way" every other weekend. 

The petitioner attempted to claim her travel expenses on her Schedule C (Form 1040) but, "the IRS issued a notice of deficiency disallowing her deductions for car and truck expenses, travel expenses, and other business expenses."

Thanks to this new July 18, 2022 court ruling -- in which it was determined that the plaintiff could deduct $12,000 in vehicle expenses for the year at issue -- these types of costs can now be deducted.

Accounting Web shared details about how tax filers can go about legally claiming vehicle expenses associated with gig work of various types:

For example, if they drive their own passenger car to visit clients or customers, they may write off the portion of their vehicle’s costs that is attributable to business use, subject to some special limits. If they use their car 80 percent for business, they can deduct 80 percent of the costs.

The vehicle expenses are deductible under one of two methods:

1. Standard mileage rate: This is a flat rate adjusted by the IRS at least annually. For 2022, the deduction is 58.5 cents per business mile for the first half of the year and 62.5 cents for the second half. Also, they can add in business-related parking fees and tolls.

2. Actual expenses: Alternatively, they can deduct actual expenses based on the percentage of business use. This includes gas, oil, insurance, repairs, licenses, tires, etc., plus a generous depreciation allowance.

It is worth noting that the "actual expenses" method typically offers a larger deduction, but it also requires more documentation. If you work a side gig and have interest in deducting vehicular costs, talk to your CPA about which option is best for your specific situation. 

Will you be taking advantage of this tax deduction option?

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Rebekah Barton

Rebekah Barton

Rebekah's search engine optimization career began completely by accident as a college student. Over the course of her career so far, she has "grown up" with the SEO industry, from writing content while juggling classes to managing her own teams of writers and overseeing SEO strategy in subsequent roles. She is excited to bring her passion for high-quality content to CountingWorks, Inc.

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