Lyft Driver Taxes in California - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Essentials for Lyft Drivers in California

Navigating the Golden State’s roads as a Lyft driver offers flexibility, but also brings unique tax responsibilities. As an independent contractor, understanding these obligations is crucial for avoiding penalties and maximizing potential savings.

The IRS requires all Lyft drivers to report their earnings as self-employment income on Schedule C (Profit or Loss From Business) when filing federal taxes. Earnings over $400 necessitate the payment of self-employment taxes, which cover both Social Security and Medicare contributions. Accurate record-keeping throughout the year is essential for a smooth tax filing process.

How California Handles Gig Worker Taxes

As a resident of California, a state income tax return is required even if no federal tax is owed. California employs a graduated income tax system, meaning the tax rate increases as your income rises. This means your tax liability isn't a flat percentage; it's calculated based on income brackets. Lyft drivers operating in California will report their self-employment income on Form 540, California Resident Income Tax Return, and will likely need to utilize Schedule CA (540), California Adjustments – Residents. California also has a minimum franchise tax for self-employed individuals, even if no income tax is due. This is currently $800 as of the 2024 tax year (for 2025 filing) and is subject to change. Furthermore, California treats certain gig worker expenses differently than the federal government, so careful attention to state-specific rules is vital. California’s Franchise Tax Board (FTB) provides detailed guidance for independent contractors; resources can be found at https://www.ftb.ca.gov/. Given California’s relatively high gas prices, it’s particularly important to carefully evaluate whether the standard mileage rate or the actual expense method will yield a greater tax benefit. Quarterly estimated tax payments are often required to avoid underpayment penalties, especially if your tax liability is expected to be over $1,000.

Top Tax Deductions for California Drivers

• Standard Mileage: The most popular deduction for Lyft drivers. The 2025 rate is 70 cents per mile. Considering California’s consistently higher gas prices, carefully compare this to the actual expense method to determine which provides the largest deduction.
• Tolls & Parking: California drivers frequently encounter tolls, particularly around major metropolitan areas like Los Angeles and the Bay Area, utilizing the Fastrak system. These tolls, along with parking fees incurred while actively driving for Lyft, are deductible.
• Phone & Data Plan: The portion of your monthly phone and data bill directly related to your Lyft driving activities is deductible. Keep a log of business usage to support this deduction.
• Vehicle-Related Costs: Expenses like car washes, air fresheners, phone mounts, dash cams, and insulated food bags used for deliveries are deductible as business expenses.

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

Understanding the 15.3% Self-Employment Tax

This tax comprises Social Security and Medicare taxes. Unlike traditional employment where these taxes are withheld from your paycheck, as a Lyft driver, you are responsible for paying both the employer and employee portions, totaling 15.3% on net earnings exceeding $400. This is in addition to your regular income tax liability.