Lyft Driver Taxes in Washington - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Essentials for Lyft Drivers in Washington

Navigating the evergreen state as a rideshare driver offers flexibility, but also introduces unique tax considerations. As an independent contractor for Lyft, understanding your tax obligations is crucial for a smooth tax season.

The IRS requires Lyft drivers to report their earnings on Schedule C (Profit or Loss from Business) as self-employment income. This means drivers are responsible for paying both income tax and self-employment tax – covering Social Security and Medicare – on net earnings exceeding $400. Platforms like Lyft do not withhold these taxes, so proactive planning is essential.

How Washington Handles Gig Worker Taxes

Washington is famous for not having a personal income tax, but it has a Business & Occupation (B&O) tax. For most gig workers, your gross income won't be high enough to owe B&O tax, but you should be aware of the threshold. The B&O tax is a gross receipts tax, meaning it’s based on the total revenue from your rideshare activity, not your profit. Currently, the threshold for requiring a B&O tax account is $25,000 or more in gross income. Even if you don't meet the threshold, it's important to understand the rules. The Washington Department of Revenue offers detailed guidance on B&O tax for service businesses, and it's recommended to review their resources, especially if your Lyft income is substantial. Keep accurate records of all your earnings, as this information is needed for both federal and potential state tax reporting. While Washington doesn't have a state income tax, failing to comply with B&O tax requirements can result in penalties. Remember to consult with a tax professional if you are unsure about your B&O tax obligations.

You can find more information on Washington State taxes here: Washington State Department of Revenue

Top Tax Deductions for Washington Drivers

• Standard Mileage: The #1 deduction. The 2025 rate is 70 cents per mile. Given Washington's relatively high gas prices, carefully consider if the standard mileage rate or actual expenses method will yield a larger deduction.
• Tolls & Parking: While Washington doesn't have extensive toll roads, any tolls incurred during rideshare trips are deductible. Parking fees directly related to picking up or dropping off passengers are also deductible.
• Phone & Data Plan: The percentage of your phone and data plan used for business purposes (e.g., navigation, driver app) is deductible. Keep a log of business usage to support your claim.
• Vehicle-Related Costs: Expenses like car cleaning supplies, phone mounts, dash cams, and hot bags for food delivery (if you also drive for delivery services) 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 results in the largest overall deduction.

Understanding the 15.3% Self-Employment Tax

Self-employment tax covers both Social Security and Medicare taxes. As a W-2 employee, these taxes are automatically withheld from your paycheck. However, as an independent contractor, you are responsible for paying both the employer and employee portions, totaling 15.3% on net earnings over $400. This is a significant tax obligation, so accurate record-keeping and potential quarterly estimated tax payments are crucial to avoid penalties.