Lyft Driver Taxes in Tennessee - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Essentials for Lyft Drivers in Tennessee

Navigating the vibrant streets of cities like Nashville and Memphis as a Lyft driver offers flexibility, but also brings tax responsibilities. As an independent contractor, earnings from Lyft are subject to both federal and, despite Tennessee’s favorable tax climate, certain federal obligations.

The IRS requires Lyft drivers to report their income on Schedule C (Profit or Loss from Business) as self-employment income. This means drivers are considered business owners and are responsible for paying self-employment taxes, which cover both Social Security and Medicare. Failure to accurately report income and pay these taxes can result in penalties and interest.

How Tennessee Handles Gig Worker Taxes

Tennessee boasts a unique tax landscape, notably lacking a state income tax on wages and salaries. However, this doesn’t exempt Lyft drivers from all tax obligations. While you won’t file a Tennessee state income tax return, you are still fully subject to federal income and self-employment taxes. Tennessee does levy sales tax on certain services, but this is generally handled by Lyft directly, meaning drivers aren’t typically responsible for collecting or remitting sales tax on fares.

A significant consideration for Tennessee drivers is the potential for local property taxes if operating a vehicle registered to a business. Furthermore, while Tennessee doesn’t have a traditional income tax, the state does have a Hall income tax on interest and dividend income, which may be relevant if a driver has substantial investment income alongside their Lyft earnings. It’s crucial to remember that even without state income tax, meticulous record-keeping of mileage and expenses is vital to minimize federal tax liability. Tennessee’s pro-business environment doesn’t negate the need for diligent tax planning. For more information on Tennessee’s tax structure, visit the Tennessee Department of Revenue.

Top Tax Deductions for Tennessee Drivers

• Standard Mileage: The #1 deduction for most drivers. The 2025 rate is 70 cents per mile. Given Tennessee’s relatively moderate gas prices compared to states like California or Washington, the standard mileage rate is often the most advantageous method for maximizing deductions.
• Tolls & Parking: While Tennessee doesn’t have extensive toll road networks, any tolls incurred while actively driving for Lyft are deductible. Parking fees directly related to picking up or dropping off passengers are also deductible.
• Phone & Data Plan: The portion of your monthly phone and data plan used for Lyft driving is deductible. Keep detailed records of business use versus personal use to substantiate the deduction.
• Vehicle-Related Costs: Expenses like car washes, phone mounts, dash cams, first-aid kits, and insulated food bags used for passenger comfort 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 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. Lyft does not withhold these taxes, so proactive tax planning and potentially making estimated tax payments throughout the year are essential to avoid penalties.