Lyft Driver Taxes in Michigan - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Essentials for Lyft Drivers in Michigan

Navigating the roads of Michigan as a Lyft driver offers flexibility, but also brings unique tax responsibilities. As an independent contractor, earnings from driving are considered self-employment income, requiring careful attention to both federal and state tax obligations.

The IRS requires Lyft drivers to report their income on Schedule C (Profit or Loss from Business) with Form 1040. Crucially, this income is also subject to self-employment tax, covering both Social Security and Medicare taxes, which are not automatically withheld from your Lyft payouts. Proper record-keeping throughout the year is essential to accurately calculate income, deductions, and tax liabilities.

How Michigan Handles Gig Worker Taxes

As a resident of Michigan, filing a state income tax return is required, even if no Michigan income tax was withheld. Michigan operates under a flat income tax rate, currently at 4.05% for the 2025 tax year. This means all taxable income is taxed at the same rate. Lyft drivers, being self-employed, will report their earnings and deductions on Form MI-1040, Michigan's Resident Income Tax Return. Self-employed individuals will also likely need to file Schedule 1 (Additional Income and Adjustments) to report business income and deductions. Michigan also requires the payment of estimated taxes quarterly if your expected tax liability is $500 or more. Failing to do so can result in penalties. The Michigan Department of Treasury provides resources and tools to help navigate these requirements, including online filing options and payment plans. It's important to note that Michigan does not have a separate tax form specifically for gig workers; the standard individual income tax forms are used, with Schedule C information integrated into the overall return. Keep detailed records of all income and expenses to ensure accurate reporting and maximize potential deductions. For more information and resources, visit the Michigan Department of Treasury website: Michigan Department of Treasury.

Top Tax Deductions for Michigan Drivers

• Standard Mileage: The most popular deduction for Lyft drivers. For the 2025 tax year, the standard mileage rate is 70 cents per mile. Michigan's relatively high gas prices, particularly in urban areas like Detroit and Ann Arbor, make utilizing the standard mileage rate a very beneficial option for most drivers.
• Tolls & Parking: While Michigan doesn't have extensive toll roads, any tolls incurred while actively driving for Lyft are deductible. Parking fees directly related to pickups and drop-offs are also deductible.
• Phone & Data Plan: If you use your phone for Lyft-related activities (navigation, accepting rides, etc.), you can deduct the percentage of your monthly bill that corresponds to business use. Keep a log of business usage to support your deduction.
• Vehicle-Related Costs: Expenses like car washes, phone mounts, dash cams, first-aid kits, and insulated food bags used for deliveries are deductible. Maintain receipts for these purchases.

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

Understanding the 15.3% Self-Employment Tax

The 15.3% self-employment tax comprises two components: 12.4% for Social Security and 2.9% for Medicare. 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. You can reduce your self-employment tax liability by deducting one-half of your self-employment tax from your gross income.