Lyft Driver Taxes in Arizona - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Essentials for Lyft Drivers in Arizona

Navigating the vibrant streets of Phoenix, Tucson, and beyond as a Lyft driver offers flexibility, but also brings tax responsibilities. As an independent contractor, understanding these obligations is crucial for a smooth tax season.

The IRS requires Lyft drivers to report their earnings on Schedule C (Profit or Loss From Business) as part of their Form 1040. Furthermore, income exceeding $400 necessitates the payment of self-employment taxes, covering both Social Security and Medicare contributions, which are not automatically withheld from your Lyft payouts.

How Arizona Handles Gig Worker Taxes

As a resident of Arizona, filing a state income tax return is generally required, even if no state income tax is ultimately due. Arizona operates under a flat income tax system, meaning all income is taxed at the same rate. For the 2025 tax year, the Arizona state income tax rate is 2.5%. Lyft drivers operating as independent contractors will report their business income and expenses on Form 140-SC, Schedule C – Arizona Business Income. This form is then filed along with Form 140, Arizona Resident Income Tax Return. Arizona also allows for a deduction for qualified business income (QBI) under Section 199A of the federal tax code, which may further reduce your state tax liability. It's important to accurately track all income received from Lyft, as well as any related business expenses, to ensure proper reporting to the Arizona Department of Revenue. Arizona also has specific rules regarding estimated tax payments; if you anticipate owing more than $1,000 in state income tax, you may be required to make quarterly estimated tax payments to avoid penalties. Resources and forms can be found on the Arizona Department of Revenue website: Arizona Department of Revenue.

Top Tax Deductions for Arizona Drivers

• Standard Mileage: The most popular deduction for Lyft drivers. For the 2025 tax year, the standard mileage rate is 70 cents per mile. Given Arizona's relatively moderate gas prices compared to states like California, the standard mileage rate is often the most advantageous method for maximizing deductions.
• Tolls & Parking: While Arizona doesn't have extensive toll road systems like some states, any tolls incurred while actively driving for Lyft are deductible. Parking fees directly related to picking up or dropping off passengers are also deductible.
• Phone & Data Plan: If you use your personal phone for Lyft driving, you can deduct the percentage of your monthly bill that corresponds to business use. Keep a log of the time spent driving to accurately calculate this percentage.
• Vehicle-Related Costs: Expenses like car washes, air fresheners, phone mounts, dash cams, and insulated food/drink carriers used specifically for Lyft driving are deductible.

Key Warning: You cannot deduct both the standard mileage rate and actual car expenses (like gas, oil changes, repairs, insurance, and depreciation) in the same tax year. Choose the method that yields the larger deduction.

Understanding the 15.3% Self-Employment Tax

This tax comprises two components: 12.4% for Social Security and 2.9% for Medicare. Unlike traditional employment, Lyft and other gig platforms do not withhold these taxes from your earnings. Therefore, it’s your responsibility to calculate and pay this tax, typically through estimated tax payments made quarterly to the IRS.