Lyft Driver Taxes in Vermont - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Essentials for Lyft Drivers in Vermont

Navigating the Green Mountains as a Lyft driver offers flexibility, but also brings unique tax responsibilities. As an independent contractor, earnings from Lyft are considered self-employment income, requiring careful tracking and reporting to both the federal government and the State of Vermont.

The IRS requires Lyft drivers to report their income and expenses on Schedule C (Profit or Loss From Business) when filing their federal income tax return. Furthermore, because no taxes are automatically withheld from your Lyft earnings, drivers are responsible for paying self-employment taxes, which cover both Social Security and Medicare contributions.

How Vermont Handles Gig Worker Taxes

As a resident of Vermont, a state income tax return is required, regardless of income level. Vermont operates on a graduated income tax system, meaning the tax rate increases as your income increases. Lyft drivers, classified as independent contractors, are subject to Vermont income tax on their net earnings (income after deductions) from driving. The primary form for self-employed individuals to report income and calculate tax liability is Form INC-100, Individual Income Tax Return. Vermont also requires Schedule IN-101, which is used to calculate income from sources other than wages, including self-employment.

Vermont also has a Use Tax that may apply to purchases made online or out-of-state that were not subject to Vermont sales tax. While this is less directly related to Lyft driving, it's important to be aware of if you purchase supplies or equipment for your vehicle from outside Vermont. Vermont’s Department of Taxes offers resources and guidance specifically for self-employed individuals, including information on estimated tax payments. It is crucial to make estimated tax payments quarterly to avoid penalties at the end of the year, as Vermont does not automatically withhold income tax from Lyft earnings. Failure to do so can result in underpayment penalties. Vermont’s tax laws are subject to change, so staying updated through the Department of Taxes website is highly recommended.

You can find more information and resources on the Vermont Department of Taxes website: https://tax.vermont.gov/

Top Tax Deductions for Vermont Drivers

• Standard Mileage: The most popular and often most beneficial deduction. The 2025 rate is 70 cents per mile. Given Vermont’s rural landscape and potential for longer trips, maximizing this deduction can significantly reduce taxable income.
• Tolls & Parking: While Vermont doesn’t have extensive toll roads, 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 a log of the percentage of time your phone is used for work versus personal use to justify the deduction.
• Vehicle-Related Costs: Expenses like car washes, air fresheners, phone mounts, dash cams, and insulated food bags used for maintaining a comfortable and professional driving experience are deductible.

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

This tax covers both 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. This is a significant tax liability, so accurate income and expense tracking is essential.