Lyft Driver Taxes in Seattle, Washington - 2026

Updated for 2026 (Filing 2025 Taxes)

The Definitive Tax Guide for Seattle Lyft Drivers

Cruising through the Rainier Valley or navigating the "Mercer Mess" isn't just about ride volume: it's about what you keep after Uncle Sam takes his cut. As a Seattle-based Lyft driver, you aren't an employee. You're a business owner. This means you've got to manage your own withholding, track every mile, and leverage every possible deduction to protect your bottom line. Managing these obligations is the difference between a profitable side hustle and a surprise tax bill.

The QBI Deduction: A 20% Tax Break You Shouldn't Ignore

One of the most powerful tools in your tax arsenal is the Qualified Business Income (QBI) deduction. Under Section 199A, most gig workers can deduct up to 20% of their net business income from their taxable income. This isn't a business expense; it's a direct reduction of your taxable income, potentially saving you thousands. If your Seattle rideshare business is profitable, you'll definitely want to ensure you're claiming this on your return. It's one of the best ways to lower your effective tax rate without spending an extra dime.

Washington State Taxes: No Income Tax, But Watch the B&O

Washington is one of the few states without a personal income tax, which is a massive win for your take-home pay. However, don't overlook the state's Business and Occupation (B&O) tax. This is a tax on gross receipts, not profits. While many drivers won't owe B&O tax if their gross income is below certain thresholds - specifically the small business tax credit which often eliminates the liability for those making under $125,000 annually - you're still required to register with the Department of Revenue if your gross income exceeds $12,000. Seattle drivers also need to stay mindful of the city's specific regulatory fees and local licensing requirements that come with operating in the metro area.

Maximizing Deductions with Our Advanced Calculator

Choosing how to deduct your vehicle expenses can make or break your tax season. You've got two main paths, and you can use our Advanced Calculator to see which method puts more money back in your pocket:

• Standard Mileage: For the 2025 tax year, the rate is 70 cents per mile. In a stop-and-go city like Seattle, this is often the simplest route. It covers gas, insurance, and wear-and-tear in one flat rate.
• Actual Expenses: This method allows you to deduct the business portion of gas, oil changes, insurance, repairs, and - most importantly - Depreciation. If you've invested in a high-value Electric Vehicle (EV) to save on Seattle's high gas prices or a new SUV for Lyft Black, depreciation might provide a significantly larger benefit than the standard mileage rate.
• Home Office Savings: Don't forget the space where you manage your books, study heat maps, and handle your scheduling. Our calculator now helps you determine your Home Office deduction for administrative work, allowing you to write off a portion of your rent or mortgage interest and utilities based on the square footage of your dedicated workspace.

Local Seattle Nuances: Tolls, Parking, and Peak Events

Driving in the Emerald City comes with specific costs. Whether it's the SR-520 bridge tolls or the premium parking near Climate Pledge Arena while waiting for the post-Kraken game rush, these are 100% deductible business expenses. Keep your receipts for every car wash, phone mount, and dash cam. Given that Washington often has some of the highest gas prices in the country, tracking the "Actual Expenses" method via our tool is more important here than in almost any other city to ensure the standard rate is actually doing you justice.

Understanding the 15.3% Self-Employment Tax

When you're a traditional employee, your boss pays half of your Social Security and Medicare taxes. When you're the boss, you pay both halves. This 15.3% tax is calculated on your net earnings (your income after you've taken all your deductions). Since Lyft doesn't withhold taxes for you, it's a smart move to set aside about 25-30% of your net income for federal taxes to avoid a nasty surprise in April. We recommend making quarterly estimated payments if you expect to owe more than $1,000 to avoid underpayment penalties from the IRS.

For more specific details on state filings, you can visit the Washington State Department of Revenue: https://dor.wa.gov/