Lyft Driver Taxes in San Francisco, California - 2026

Updated for 2026 (Filing 2025 Taxes)

Tax Essentials for Lyft Drivers in San Francisco, California

Navigating the hills and high demand of San Francisco as a Lyft driver offers flexibility, but also brings unique tax considerations. As an independent contractor, understanding these obligations is crucial for a smooth tax season.

The IRS requires all Lyft drivers to report their earnings as self-employment income on Schedule C (Profit or Loss From Business) when filing their federal income tax return. Furthermore, because no taxes are automatically withheld from your Lyft earnings, drivers are responsible for paying self-employment taxes, which cover both Social Security and Medicare.

How California Handles Gig Worker Taxes

As a resident of California, a state income tax return is required even if your federal tax liability is zero. California’s tax system is graduated, meaning the tax rate increases as your income increases. This means the more you earn driving for Lyft in San Francisco, the higher percentage of your income will be taxed. The primary form for self-employed individuals to report income and calculate tax liability is Form 540. California also requires you to report your federal adjusted gross income (AGI) on this form.

California treats gig workers similarly to traditional employees for income tax purposes, but the responsibility for tax calculation and payment falls on the driver. Keep meticulous records of all income and expenses. San Francisco’s unique challenges, such as limited parking and potentially higher vehicle maintenance costs due to city driving, can significantly impact deductible expenses. The Franchise Tax Board (FTB) offers resources specifically for independent contractors and small business owners; you can find more information at the California Franchise Tax Board website. California also has estimated tax requirements. If you expect to owe $1,000 or more in California income tax, you generally need to make quarterly estimated tax payments to avoid penalties. Failure to do so can result in underpayment penalties, even if you receive a refund when you file your annual return.

Remember to factor in any local city taxes or business licenses that may be required to operate as a rideshare driver within San Francisco city limits. Consult the City and County of San Francisco’s tax collector’s office for specific requirements.

Top Tax Deductions for San Francisco, California Drivers

• Standard Mileage: The #1 deduction. The 2025 rate is 70 cents/mile. Given the consistently high gas prices in California, and particularly in San Francisco, carefully consider whether the standard mileage rate or the actual expenses method will yield a larger deduction.
• Tolls & Parking: San Francisco drivers frequently encounter tolls on bridges like the Golden Gate Bridge and Bay Bridge. These tolls, along with parking fees incurred while actively working (e.g., waiting for a ride request), are deductible.
• Phone & Data Plan: The percentage of your phone and data plan attributable to business use (driving for Lyft) is deductible. Keep a log of your mileage and the time spent actively driving to support this deduction.
• Vehicle-Related Costs: Expenses like car washes, phone mounts, dash cams, first-aid kits, and insulated food bags (for delivering food alongside rides) 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

This tax covers both Social Security and Medicare taxes. Unlike traditional employment where your employer withholds these taxes, as a Lyft driver, you are responsible for paying both the employer and employee portions, totaling 15.3% on net earnings over $400. You can deduct one-half of your self-employment tax from your gross income when calculating your adjusted gross income (AGI).