Lyft Driver Taxes in South Dakota - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Essentials for Lyft Drivers in South Dakota

Navigating the wide-open roads of South Dakota as a Lyft driver offers flexibility, but also brings tax responsibilities. As an independent contractor, earnings from driving are considered self-employment income, requiring careful tax planning.

The IRS requires all 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 and eligible deductions.

How South Dakota Handles Gig Worker Taxes

South Dakota stands out as one of the few states with no state income tax. This means Lyft drivers won't file a state income tax return based on their driving earnings. However, this does not exempt drivers from federal income and self-employment tax obligations. The lack of state income tax can be a benefit, but it's vital to remember that the IRS still requires accurate reporting of all income. South Dakota's relatively low cost of living, particularly outside of the Black Hills region, means maximizing deductions is even more important to reduce your overall tax burden. Many drivers utilize the standard mileage rate, given the significant distances often covered in the state, especially those serving rural communities. Furthermore, South Dakota's business-friendly environment doesn't currently have specific gig worker legislation, meaning drivers are treated as traditional independent contractors under federal guidelines. For more information on South Dakota's tax structure, visit the South Dakota Department of Revenue: https://dor.sd.gov/

Top Tax Deductions for South Dakota Drivers

• Standard Mileage: The most popular and often simplest deduction. For the 2025 tax year, the rate is 70 cents per mile. Given South Dakota’s expansive geography and the distances often driven between towns, this rate can significantly reduce taxable income.
• Tolls & Parking: While South Dakota doesn’t have extensive toll roads, any parking fees incurred while actively working (picking up or dropping off passengers) are deductible.
• Phone & Data Plan: You can deduct the percentage of your phone bill that relates 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 (for delivering food alongside passengers) are deductible. Keep receipts!

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

Understanding the 15.3% Self-Employment Tax

This tax covers both Social Security and Medicare, and it’s applied to your net earnings (income minus expenses) exceeding $400. Lyft and other ride-sharing platforms do not withhold these taxes from your earnings, meaning you are responsible for paying them directly to the IRS, often through estimated quarterly tax payments to avoid penalties.