Lyft Driver Taxes in North Dakota - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Essentials for Lyft Drivers in North Dakota

Navigating the wide-open roads of North Dakota as a Lyft driver offers incredible flexibility, but it also comes with important tax responsibilities. As an independent contractor, you're essentially running your own small business. Understanding these obligations isn't just crucial for compliance, it's key to maximizing your take-home pay and ensuring a smooth tax season.

The IRS considers your Lyft earnings as self-employment income, which means you'll report it on Schedule C (Profit or Loss From Business) when you file your federal income tax return. If your net earnings from self-employment exceed $400 for the year, you'll owe self-employment taxes, which cover both your Social Security and Medicare contributions. But here's some good news: you'll also likely qualify for the Qualified Business Income (QBI) deduction, a significant tax break that can effectively save you 20% on your qualified business income. Accurate, diligent record-keeping throughout the year isn't just recommended, it's absolutely essential to claim every deduction possible and minimize your overall tax liability.

How North Dakota Handles Gig Worker Taxes

As a resident of North Dakota, you'll need to file a state income tax return, generally on Form ND-1, the Individual Income Tax Return. North Dakota operates on a graduated income tax system, meaning your state tax rate will increase as your income rises. For the 2025 tax year, self-employed individuals use ND-1 to report their business income and calculate their state tax liability. Thankfully, North Dakota does not impose local income taxes, which simplifies your filing process.

The state also allows for various itemized deductions and credits that mirror many federal provisions, potentially reducing your taxable income at the state level. These might include deductions for certain business expenses or contributions to retirement accounts. Given that North Dakota's tax rates and available deductions are subject to change annually, it's always smart to consult the official North Dakota Office of State Tax Commissioner website for the most current and accurate information. Careful planning and meticulous record-keeping are your best allies in ensuring full compliance with North Dakota's tax laws. Remember to keep detailed records of all income and expenses related to your Lyft driving activities, as these will be vital for both federal and state filings.

For more information and resources, please visit the North Dakota Office of State Tax Commissioner: https://www.nd.gov/tax/

Mastering Your Deductions: Federal and State Savings for North Dakota Drivers

Deductions are your best friend as an independent contractor. They reduce your taxable income, which in turn lowers your tax bill. Here are some of the top deductions available to North Dakota Lyft drivers:

• Standard Mileage vs. Actual Expenses: The Big Choice!

  This is often the largest deduction for rideshare drivers. For the 2025 tax year, the standard mileage rate is a generous 70 cents per mile. Given North Dakota's vast distances, this can add up quickly.

  However, you also have the option to deduct your actual car expenses. This includes gas, oil changes, repairs, maintenance, tires, insurance premiums, registration fees, and a crucial component- depreciation. Depreciation allows you to deduct a portion of your car's cost over several years. You absolutely cannot deduct both methods in the same tax year, so choosing the one that yields the larger deduction is key.

  Use our Advanced Calculator below! It's specifically designed to help you compare the standard mileage deduction against your actual expenses, including the often-overlooked but very valuable depreciation. This will show you exactly which method will save you the most money.

• Phone & Data Plan: Your smartphone is essential for your business. You can deduct the business-use percentage of your phone bill and data plan. Keep a log of your business calls, app usage, and total usage to substantiate this deduction.
• Home Office Deduction: If you use a portion of your home regularly and exclusively for administrative or management activities related to your Lyft business - like tracking mileage, managing finances, or communicating with passengers - you might qualify for the home office deduction.

  Our Advanced Calculator can help here too! It allows you to calculate potential savings from the home office deduction, ensuring you don't miss out on this valuable write-off.

• Tolls & Parking: While North Dakota isn't known for extensive toll roads, any tolls you incur while actively driving for Lyft are deductible. Parking fees directly related to pickups, drop-offs, or waiting for rides are also legitimate business expenses.
• Vehicle-Related Costs: Beyond the big car expenses, don't forget the smaller necessities. Car washes, air fresheners, phone mounts, dash cams, first-aid kits, roadside assistance memberships, and even insulated bags for food delivery if you also do Lyft Eats- all these items are deductible if used for your business.
• Professional Fees: The cost of tax preparation software or hiring a tax professional to help you with your Schedule C and overall tax planning is also deductible.

The Qualified Business Income (QBI) Deduction: A 20% Tax Break

Here's a significant advantage for self-employed individuals like Lyft drivers: the Qualified Business Income (QBI) deduction. This deduction allows eligible self-employed individuals to deduct up to 20% of their qualified business income. It's a "below-the-line" deduction, meaning it reduces your taxable income, but it's not a business expense on Schedule C. Instead, it's calculated on your personal income tax return (Form 1040).

To qualify, your income must generally be from a qualified trade or business, and your taxable income must be below certain thresholds (which are adjusted annually for inflation). This deduction can lead to substantial tax savings, effectively reducing the income tax portion of your self-employment earnings by a fifth. Our Advanced Calculator can also help you understand how your net income impacts this powerful deduction.

Navigating Self-Employment Tax (The 15.3% Rule)

As a Lyft driver, you're responsible for self-employment tax, which is essentially your contribution to Social Security and Medicare. Unlike a traditional employee whose employer pays half of these taxes, you, as a self-employed individual, are responsible for both the employer and employee portions. This combined rate is 15.3% and applies to your net earnings from self-employment (your income after all business deductions) that exceed $400.

The 15.3% breaks down as 12.4% for Social Security (on earnings up to an annual limit, which adjusts each year) and 2.9% for Medicare (on all net earnings). While this can seem like a significant bite, remember that you get to deduct one-half of your self-employment tax from your gross income when calculating your Adjusted Gross Income (AGI). This deduction helps to offset some of the cost.

Since taxes aren't withheld from your Lyft pay, you're generally required to pay estimated taxes quarterly using Form 1040-ES. This applies to both your federal self-employment and income taxes, and potentially your North Dakota state income taxes. Failing to pay enough tax throughout the year via estimated payments can result in penalties. It's wise to set aside a portion of every payment you receive to cover these upcoming tax obligations.

Record-Keeping: Your Best Defense

Good record-keeping isn't just about compliance- it's about saving money. The IRS can, and often does, request documentation to support your deductions. Here's what you should keep:

• Income Records: Keep track of all income from Lyft, typically provided on a 1099-NEC or annual summary statement from Lyft.
• Expense Receipts: For every business expense, keep the receipt, invoice, or bank statement. This includes gas, maintenance, car washes, phone bills, and supplies.
• Mileage Logs: If you claim the standard mileage rate, a detailed mileage log is non-negotiable. It should include the date, starting and ending odometer readings, total miles driven, and the business purpose for each trip. Many apps can automate this for you.
• Home Office Records: If you claim the home office deduction, keep records of your home expenses (rent, utilities, insurance) and measurements of your dedicated office space.