Lyft Driver Taxes in New Mexico - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Essentials for Lyft Drivers in New Mexico

Cruising the streets of Albuquerque or Santa Fe as a Lyft driver offers flexibility, but it also comes with 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) with Form 1040. Earnings exceeding $400 necessitate the payment of self-employment taxes, which cover both Social Security and Medicare contributions. Accurate record-keeping throughout the year is essential to maximize deductions and minimize tax liability.

How New Mexico Handles Gig Worker Taxes

As a resident of New Mexico, filing a state income tax return is required, even if no federal tax is due. New Mexico utilizes a graduated income tax system, meaning the tax rate increases as your income rises. This means the more you earn, 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 W-4 and Form NMPR-2. New Mexico also requires reporting of gross receipts and potentially paying Gross Receipts Tax, depending on your total earnings. While Lyft typically handles reporting earnings to the state, it is the driver’s responsibility to ensure accurate reporting on their state income tax return. New Mexico’s Department of Taxation and Revenue offers resources and guidance for self-employed individuals, including information on estimated tax payments to avoid penalties. It's important to note that New Mexico does not offer a specific deduction for the federal Qualified Business Income (QBI) deduction at the state level, so federal QBI calculations do not directly translate to state tax savings. Keep detailed records of all income and expenses to accurately calculate your New Mexico tax liability.

For more information, visit the New Mexico Taxation and Revenue Department: https://www.tax.newmexico.gov/

Top Tax Deductions for New Mexico Drivers

• Standard Mileage: The most popular deduction for Lyft drivers. For the 2025 tax year, the rate is 70 cents per mile. Given New Mexico’s relatively moderate gas prices compared to states like California, the standard mileage rate is often the most advantageous method.
• Tolls & Parking: While New Mexico doesn’t have extensive toll road systems, 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 bill that corresponds to business use. Keep a log of the time spent using your phone for Lyft-related activities to justify the deduction.
• Vehicle-Related Costs: Expenses like car washes, air fresheners, phone mounts, dash cams, and insulated food bags used for deliveries (if applicable) 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 larger deduction.

Understanding the 15.3% Self-Employment Tax

This tax comprises Social Security and Medicare taxes. Unlike traditional employment where these taxes are withheld from your paycheck, as a Lyft driver, you are responsible for paying both the employer and employee portions, totaling 15.3% on net earnings exceeding $400. This is a significant tax obligation, so planning for it throughout the year is essential.