Tax Code Hacking

Driving for ridesharing companies sometimes feels like tax code hacking. I understand that as a 1099 contractor, I am not entitled to many of the same employee protections afforded to actual employees but I still like comparing the performance of riding against a traditionaly hourly wage job. 2016 rates for mileage costs are $0.54/mile, but my actual costs are much much lower. I pay $250/month for a 1,950 mileage lease so it is safe to say my depreciation expense is $0.13/mile. My gas mileage usually clocks in around 42 mi/gallon (2016 Ford Fusion SE Hybrid). After Uber discounts, I usually pay ~$2.10/gallon for gas (mid-February 2016) so I pay $0.05/mile in gas. My insurance is another $0.05/mile but Uber and Metromile have an agreement that going to a pickup and during a pickup, Uber will cover it. Therefore, my total cost per mile is ~$0.18/mile.

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Now, let's look at some of my standard rates using the IRS rate:

~200 miles, 10 hours, $240

$240 - (200 * $0.54) = $132

Being paid $13.20/hour never feels great, especially in the bay area where minimum wage is $12/hour! It is important to understand, however, that this is what the IRS recognizes as income, not actualy cash (as you see above).

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Let's look at the same numbers using my actual costs:

~200 miles, 10 hours, $240

$240 - (200 * $0.18) = $204

A little better numbers of $20.40 per hour. But the important thing to note is that to the IRS, you are only earning the $13.20/hour. The extra $7.20/hour is 100% tax-free. This makes it very difficult to compare numbers with a traditional job.

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