Lyft Driver Taxes in Texas - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Essentials for Lyft Drivers in Texas

Navigating the bustling streets of cities like Austin, Dallas, and Houston as a Lyft driver offers flexibility, but also brings tax responsibilities. As an independent contractor, earnings from Lyft are considered self-employment income, requiring careful tax planning.

The IRS requires 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, which Lyft does not withhold. Proper record-keeping throughout the year is essential to accurately calculate income and eligible deductions.

How Texas Handles Gig Worker Taxes

The big perk in the Lone Star State is no personal income tax. However, be aware of the Texas Franchise Tax. While it has a high threshold (over $1.2 million) that rarely applies to solo gig workers, it's a key part of the state's business tax structure. Generally, as a single-member LLC or sole proprietor operating as a Lyft driver, you likely won’t be subject to the Franchise Tax unless your gross revenue significantly exceeds that threshold. However, it’s important to understand the system, especially if your business grows. Texas does not have a state equivalent to the federal self-employment tax; however, the federal self-employment tax still applies to your earnings. Texas also doesn’t have a state income tax withholding requirement for gig workers, meaning it’s entirely the driver’s responsibility to manage estimated tax payments to the IRS. Staying informed about Texas business tax laws is crucial for maintaining compliance. For detailed information and updates, consult the Texas Comptroller of Public Accounts website.

Top Tax Deductions for Texas Drivers

• Standard Mileage: The #1 deduction. The 2025 rate is 70 cents/mile. With generally lower gas prices in Texas compared to other states, the standard mileage rate often provides a substantial deduction, simplifying tax filing.
• Tolls & Parking: Texas drivers frequently encounter tolls, particularly around major metropolitan areas like Dallas and San Antonio. Keep detailed records of all toll expenses paid for rideshare driving, as these are deductible. Parking fees incurred while waiting for or during a ride are also deductible. Consider using a TxTag or other electronic toll payment system for easy tracking.
• Phone & Data Plan: The percentage of your phone and data plan attributable to business use is deductible. If you use your phone 70% of the time for Lyft driving, you can deduct 70% of the bill.
• Vehicle-Related Costs: Expenses like car washes, air fresheners, phone mounts, dash cams, and insulated food bags used for passenger comfort are deductible. Keep receipts for these items.

Key Warning: You cannot deduct both the standard mileage rate and actual car expenses like gas or repairs in the same year. Choose the method that yields the larger deduction.

Understanding the 15.3% Self-Employment Tax

The 15.3% self-employment tax covers Social Security and Medicare taxes. Unlike traditional employment, Lyft and other gig platforms do not withhold these taxes from your earnings. Therefore, it’s your responsibility to calculate and pay this tax, typically through quarterly estimated tax payments to the IRS. This tax applies to your net earnings – your gross income minus your business deductions – exceeding $400.