Uber Driver Taxes in South Dakota - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Essentials for Uber Drivers in South Dakota

Navigating the wide-open roads of South Dakota as an Uber driver offers flexibility, but also brings unique tax responsibilities. As an independent contractor, earnings from Uber and other gig platforms are considered self-employment income, requiring diligent record-keeping and accurate tax filing.

The IRS requires Uber drivers to report their income and expenses on Schedule C (Profit or Loss from Business) when filing their federal income tax return. Crucially, this income is also subject to self-employment tax, which covers both Social Security and Medicare taxes. Platforms such as Uber do not withhold these taxes, meaning drivers are responsible for paying them directly to the IRS, often through estimated tax payments throughout the year.

How South Dakota Handles Gig Worker Taxes

South Dakota stands out as one of the few states with no state income tax. This means Uber drivers in the Mount Rushmore State won’t face a state income tax bill on their earnings. However, this does not exempt drivers from federal income tax or self-employment tax obligations. The lack of state income tax can be a significant benefit, allowing drivers to retain a larger portion of their earnings. However, it also means there's no state-level offsetting tax credit or deduction to consider. South Dakota does have sales tax, which applies to the services Uber provides, but this is collected by Uber and not the driver’s responsibility to remit. Drivers should be aware that while South Dakota doesn’t have a specific “gig worker” classification, the IRS treats all independent contractors the same, regardless of the platform they use. Given South Dakota’s relatively low cost of living compared to national averages, maximizing deductions becomes even more important for drivers to optimize their tax situation. For further information on South Dakota tax laws and resources, please 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 standard mileage rate is 70 cents per mile. South Dakota’s generally lower gas prices compared to coastal states make the standard mileage rate an especially attractive option for many drivers, simplifying record-keeping without sacrificing significant potential deductions.
• Tolls & Parking: While South Dakota doesn’t have extensive toll roads, any tolls incurred while actively driving for Uber are deductible. Parking fees directly related to pickups and drop-offs are also deductible.
• Phone & Data Plan: If you use your phone for Uber-related activities (navigation, accepting rides, communication), you can deduct the percentage of your monthly bill that corresponds to business use. Keep detailed records of how your phone is used for work.
• Vehicle-Related Costs: Expenses like car washes, phone mounts, dash cams, first-aid kits, and insulated food bags used specifically for Uber deliveries are deductible.

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

Self-employment tax is a combined Social Security and Medicare tax for individuals who work for themselves. It’s currently 15.3% on net earnings over $400. Because Uber doesn’t withhold these taxes, drivers must calculate and pay them, typically through quarterly estimated tax payments to avoid penalties. Remember, half of the self-employment tax is deductible from your gross income.