Lyft Driver Taxes in New Jersey - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Essentials for Lyft Drivers in New Jersey

Navigating the Garden State’s roadways as a Lyft driver offers flexibility, but also brings unique tax responsibilities. As an independent contractor, earnings from Lyft are considered self-employment income, requiring careful tracking and reporting to both the federal government and the State of New Jersey.

The IRS requires all Lyft drivers to report their 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. Failure to properly account for these taxes can result in penalties and interest.

How New Jersey Handles Gig Worker Taxes

As a resident of New Jersey, a state income tax return is required even if no New Jersey income tax was withheld. New Jersey operates on a graduated income tax system, meaning the tax rate increases as your income rises. For the 2025 tax year, New Jersey residents earning income as independent contractors will primarily use Form NJ-1040, New Jersey Resident Income Tax Return, along with Schedule NJ-SE, Self-Employment Earnings. This schedule is used to calculate your net profit or loss from your Lyft driving business. New Jersey also has a minimum tax calculation that may apply, even if your total tax liability calculated using the graduated rates is zero. It’s crucial to accurately report your earnings and deductions to avoid underpayment penalties. New Jersey also allows for certain credits and deductions that may reduce your overall tax burden. Keep detailed records of all income and expenses related to your Lyft driving activity. The Division of Taxation frequently updates its guidance, so staying informed is essential. New Jersey also requires estimated tax payments if you expect to owe more than $500 in taxes for the year. These payments are typically made quarterly.

Top Tax Deductions for New Jersey Drivers

• Standard Mileage: The most popular deduction for Lyft drivers. The 2025 rate is 70 cents per mile. Given New Jersey’s relatively high cost of living and frequent traffic congestion, the standard mileage rate often provides a substantial deduction.
• Tolls & Parking: New Jersey drivers frequently encounter tolls on the New Jersey Turnpike and Garden State Parkway. These tolls, along with any parking fees incurred while actively driving for Lyft, are deductible business expenses.
• Phone & Data Plan: If you use your personal phone for Lyft driving (navigation, accepting rides, etc.), you can deduct the percentage of your monthly bill that corresponds to business use. Keep a log of your business usage to support this deduction.
• Vehicle-Related Costs: Expenses like car washes, phone mounts, dash cams, first-aid kits, and insulated food bags (if you deliver food alongside rides) are all deductible as business expenses.

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 yields the larger 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 ride-sharing platforms do not withhold these taxes from your earnings. Therefore, it is your responsibility to calculate and pay this tax, typically through estimated tax payments made quarterly to the IRS. The 15.3% applies to 92.35% of your net earnings (your profit after deducting business expenses) exceeding $400.

For more information on New Jersey state taxes, please visit the New Jersey Division of Taxation website.