Lyft Driver Taxes in Colorado - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Essentials for Lyft Drivers in Colorado

Navigating the Rocky Mountains as a Lyft driver offers flexibility, but understanding the tax implications of independent contracting is crucial for financial success. As a rideshare driver in Colorado, earnings are considered self-employment income, requiring diligent record-keeping and accurate tax filing.

The IRS requires Lyft drivers to report their income on Schedule C (Profit or Loss from Business) with Form 1040. Because you are self-employed, no taxes are automatically withheld from your earnings. This means you are responsible for paying both income tax and self-employment tax (Social Security and Medicare) on your net earnings – profits exceeding $400.

How Colorado Handles Gig Worker Taxes

As a resident of Colorado, you are required to file a state income tax return, even if your only income is from Lyft. Colorado utilizes a flat income tax rate, currently at 4.40% for the 2025 tax year. This means all taxable income is taxed at the same rate, simplifying the state tax calculation. Lyft drivers operating in Colorado will report their self-employment income on the Colorado Form DR 0104, Individual Income Tax Return. This form is used to calculate your Colorado taxable income and determine your state tax liability. It's important to note that Colorado also requires you to pay estimated taxes quarterly if you expect to owe $1,000 or more in state income tax. Failure to do so may result in penalties. Colorado also offers various credits and deductions that may reduce your tax burden, so exploring these options is recommended. The state's Department of Revenue provides resources and guidance for self-employed individuals, including information on estimated tax payments and available deductions. Remember to keep detailed records of all income and expenses related to your Lyft driving activity to accurately complete your Colorado tax return.

For more information and resources, please visit the Colorado Department of Revenue: https://www.colorado.gov/revenue

Top Tax Deductions for Colorado Drivers

• Standard Mileage: The most popular and often most beneficial deduction. For the 2025 tax year, the standard mileage rate is 70 cents per mile. This rate covers wear and tear, gas, oil, and other vehicle-related expenses.
• Tolls & Parking: Keep receipts for any tolls incurred while actively driving for Lyft, as well as parking fees directly related to picking up or dropping off passengers. While Colorado doesn't have extensive toll roads like some states, any tolls encountered during trips are deductible.
• Phone & Data Plan: You can deduct the percentage of your phone bill that is used for business purposes. Carefully track the business use versus personal use to determine the deductible amount.
• Vehicle-Related Costs: Expenses like car cleaning supplies, phone mounts, dash cams, first-aid kits, and insulated food bags (for delivering food alongside rides) are all deductible.

Key Warning: You cannot deduct both the standard mileage rate and actual car expenses (like gas, oil, repairs, insurance) in the same tax year. Choose the method that yields the larger 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 self-employed individual, you are responsible for paying both the employer and employee portions, totaling 15.3% on net earnings over $400. This is a significant tax liability, so proper planning and estimated tax payments are essential.