Lyft Driver Taxes in San Diego, California - 2026

Updated for 2026 (Filing 2025 Taxes)

Tax Essentials for Lyft Drivers in San Diego, California

Navigating the vibrant streets of San Diego as a Lyft driver offers flexibility, but also brings unique tax responsibilities. The income earned through ridesharing is considered self-employment income, requiring careful tracking and reporting to both the federal government and the State of California.

As a Lyft driver, the IRS requires reporting of all earnings on Schedule C (Profit or Loss from Business) when filing Form 1040. Furthermore, earnings exceeding $400 necessitate the payment of self-employment taxes, covering both Social Security and Medicare contributions. Accurate record-keeping throughout the year is crucial for maximizing deductions and ensuring compliance.

How California Handles Gig Worker Taxes

California, as a state with a progressive income tax system, requires all residents, including independent contractors like Lyft drivers operating in cities like San Diego, to file a state income tax return. This means even if federal income tax isn't owed, a California return is generally required. The state’s tax rates are graduated, meaning the percentage of income taxed increases as income rises. For the 2025 tax year, California residents will primarily use Form 540 to report their income and calculate their state tax liability.

Lyft drivers in San Diego should be particularly mindful of potential expenses related to parking, which can be significant in popular areas like the Gaslamp Quarter or near the beaches. These parking costs, when directly related to ridesharing activity, are deductible. Additionally, the high demand for rides during events at Petco Park or the San Diego Zoo can lead to increased mileage, making accurate tracking even more important. California also has specific rules regarding business licenses; while Lyft generally handles the core requirements, drivers should confirm they meet any local San Diego city ordinances related to operating a business. California’s Franchise Tax Board (FTB) provides comprehensive resources for self-employed individuals; you can find more information at https://www.ftb.ca.gov/. Remember to factor in California’s state income tax when estimating your overall tax liability throughout the year to avoid potential underpayment penalties.

Top Tax Deductions for San Diego, California Drivers

• Standard Mileage: The #1 deduction. The 2025 rate is 70 cents/mile. Given California’s consistently high gas prices, especially in the San Diego area, carefully consider whether the standard mileage rate or the actual expenses method will yield a greater tax benefit.
• Tolls & Parking: Drivers frequently navigating highways or downtown San Diego will likely incur toll and parking expenses. Keep detailed records of these costs, as they are fully deductible. California utilizes the Fastrak system for toll roads.
• Phone & Data Plan: The percentage of your phone and data plan attributable to business use (e.g., navigation, driver app) is deductible.
• Vehicle-Related Costs: Expenses like car washes to maintain a professional appearance, phone mounts, dash cams, and supplies like hand sanitizer or hot bags for food delivery (if also doing that) are deductible.

Key Warning: You cannot deduct both the standard mileage rate and actual car expenses like gas or repairs in the same year. Choose the method that results in the largest overall deduction.

Understanding the 15.3% Self-Employment Tax

The 15.3% self-employment tax covers both 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. Ride-sharing platforms like Lyft do not withhold these taxes, making quarterly estimated tax payments crucial to avoid penalties.