Lyft Driver Taxes in Minnesota - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Essentials for Lyft Drivers in Minnesota

Navigating the Twin Cities and beyond as a Lyft driver offers flexibility, but also brings tax responsibilities. As an independent contractor, understanding these obligations is crucial for a smooth tax season.

The IRS requires Lyft drivers to report their earnings on Schedule C (Profit or Loss From Business) as part of their Form 1040. Furthermore, earnings exceeding $400 necessitate the payment of self-employment taxes, covering both Social Security and Medicare contributions, which are not automatically withheld from your Lyft payouts.

How Minnesota Handles Gig Worker Taxes

As a resident of Minnesota, filing a state income tax return is required, regardless of income level. Minnesota operates on a graduated income tax system, meaning the tax rate increases as your income rises. For the 2025 tax year, self-employed individuals will primarily utilize Minnesota Form M1, Individual Income Tax Return, along with Schedule 1, to report business income and deductions. Minnesota also has a specific form, Schedule F, for calculating farm income, but this is not applicable to Lyft drivers. It's important to note that Minnesota conforms to many federal deductions, but there can be differences. For example, Minnesota has its own rules regarding itemized deductions and credits. Keep meticulous records of all income and expenses, as Minnesota actively audits self-employment income. Estimated tax payments may be required throughout the year if you anticipate owing more than $1,000 in state income tax. Failure to pay estimated taxes can result in penalties. The Minnesota Department of Revenue provides comprehensive resources and guidance for self-employed individuals; you can find more information at the Minnesota Department of Revenue website.

Top Tax Deductions for Minnesota Drivers

• Standard Mileage: The most popular deduction for Lyft drivers. For the 2025 tax year, the standard mileage rate is 70 cents per mile. Given Minnesota's variable weather conditions and potential for significant mileage, this rate can result in substantial savings.
• Tolls & Parking: While Minnesota 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: You can deduct the percentage of your phone and data plan attributable to your Lyft driving activities. Keep a log of the time spent driving versus personal use to accurately calculate this percentage.
• Vehicle-Related Costs: Expenses like car washes (especially important during Minnesota winters!), phone mounts, dash cams, and supplies like hand sanitizer or hot bags for food delivery (if permitted by Lyft) are deductible.

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

Understanding the 15.3% Self-Employment Tax

This 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 quarterly estimated tax payments to the IRS and the State of Minnesota.