So You Want to Become a Lyft Driver in Traverse City…

What Tax and Legal Issues Should You Be Aware of?


Lyft’s website says they are hiring drivers all across Michigan.

Applicants need to be:

-at least 21 years old

-pass a background and DMV check

-own a smart phone

-have a 2005 or newer vehicle with four doors and 5-8 seats

-possess a valid driver’s license, registration and insurance.

Applications are being accepted online.



Lyft drivers are independent contractors, not employees of Lyft. So, as a driver, you are considered to be self-employed; you own a separate “business” that Lyft uses to provide driving services. When you get paid, it is not like a traditional paycheck; taxes have not been taken out. You, not Lyft, are responsible for paying your own taxes. If you are a full-time Lyft driver, you will also have to file quarterly estimated income taxes to the IRS. Lyft drivers also do not get any benefits or worker’s compensation.

That sounds complicated… The bright side is there are:



You can either:

A) Deduct the actual expenses of operating the vehicle for Lyft including gas, oil, repairs, insurance, and maintenance.


B) Take the standard IRS Mileage deduction (54 cents/mile as of 2016).

If you use the car personally as well, you can only deduct your business use expenses. And you must keep records to support your claims such as receipts and mileage logs.

Other Tax Advantages for Lyft drivers are:

-Water, gum or snacks for passengers

-Tolls and parking fees

-Smart phone expenses used for Lyft

No W-2 needed as a Lyft driver, but you will have to fill out a 1099-K reporting all customer payments, and maybe some other forms too.



Lyft provides insurance for you while passengers are in your vehicle, but your personal insurance needs to cover you when you do not have passengers in your car. You must also rely on your personal insurance for vehicle repairs and some medical bills.

Without a rideshare-specific policy, your personal insurance may be pretty worthless though. Personal auto insurance wasn’t designed to give you coverage as a rideshare driver. Many personal auto insurance providers exclude coverage when you are using your vehicle as a rideshare driver. And, Lyft’s full commercial liability coverage doesn’t apply until you accept a ride. With Farmers Rideshare, you can avoid a potential gap in coverage by extending your personal auto insurance coverage when you are logged in and waiting to be matched with your next rider.

Make sure to get a ride-share specific policy! Farmers Insurance is the only carrier in Michigan that provides this endorsement. This will protect you when you do not yet have passengers in your car. The cost of Rideshare Insurance Coverage varies.

This infographic from Farmers Insurance shows when Lyft covers you and when your rideshare insurance needs to cover you:



“How soon Lyft will be able to offer instantaneous, round-the-clock service – as is available in larger markets like Detroit and Chicago – remains to be seen. Attempts …over the past week to hail rides on the app produced mixed results: No drivers were listed as available Friday night or Saturday morning, but rides were instantly available on some weekdays, including both early morning and late afternoon Monday.”-The Ticker on 9/12/17

(Photo Credit: Traverse City Convention & Visitors Bureau)