Driving for a rideshare or delivery app can feel like a side job, but the IRS treats it as a business. You are usually an independent contractor, which means no tax is withheld, you owe self-employment tax, and you can deduct the costs of earning the income. The biggest deduction for most drivers is the car. This page covers how drivers in Naperville, Aurora and across Chicagoland report income, keep mileage records and use the new tips deduction.
What you will receive and what to report
Platforms may send a Form 1099-K, a Form 1099-NEC, or both. The federal 1099-K threshold is more than $20,000 and more than 200 transactions, but many drivers get a form below that level, and some state thresholds are lower. Either way, you must report all earnings. Add up what each app paid you, including tips and bonuses, and compare it with the form. The amount on a 1099-K is gross, so fees, tolls and service charges the platform kept are separate expenses you still need to claim. You report income and expenses on Schedule C. See Form 1099-NEC and 1099-K.
Mileage: the deduction that matters most
You can deduct either the standard mileage rate or actual car expenses. Under Publication 463:
- If you own the car, choose the standard mileage rate in the first year it is available for business. You may switch to actual expenses in a later year, but you cannot use the standard rate on a car once you have claimed accelerated depreciation or a Section 179 deduction on it.
- You cannot use the standard rate if you use five or more cars at once in the business.
- Parking fees and tolls can usually be added on top of the standard rate.
- Keep a log: date, destination, business purpose and miles. A year-end estimate does not hold up well, and app summaries often cover only part of your miles.
Commuting from home to where you first start looking for rides is generally not deductible. How to treat miles while waiting for a request or driving to a busy area is a judgment call, so document your approach and apply it consistently. If you choose actual expenses, you deduct the business percentage of gas, insurance, repairs, registration, interest and depreciation; compare both methods in your first year. See vehicle and mileage deductions.
The new car loan interest deduction is limited to loans on vehicles used for personal purposes. If the car is mainly a work vehicle, ask us how that rule interacts with your business deductions before you claim both.
The new tips deduction
For tax years 2025 through 2028, workers in occupations that customarily receive tips can deduct up to $25,000 of qualified tips. The IRS list includes "taxi and rideshare drivers and chauffeurs" and "goods delivery people." Tips must be voluntary, paid by customers in cash, card or app, and reported to you on a Form W-2, 1099-NEC, 1099-MISC, 1099-K or Form 4137. The deduction phases out above $150,000 of modified AGI ($300,000 joint), and for self-employed workers it cannot exceed the net income from the business where the tips were earned. Tips you deduct this way are not counted again as qualified business income. Because the rules and reporting forms are new, check how your apps show tips. See new deductions for tips and overtime.
Other deductions drivers miss
Phone and data plan business share, phone mounts and dash cameras, car washes and cleaning, water and snacks for riders, insulated bags for delivery, background check and platform fees, business-use insurance add-ons, health insurance premiums for the self-employed, and a retirement contribution such as a SEP IRA or solo 401(k). Medical, personal clothes and traffic tickets are not deductible.
Taxes you will owe
- Self-employment tax of 15.3 percent on net earnings, covering Social Security and Medicare.
- Income tax on net profit, plus Illinois tax at 4.95 percent for 2025.
- Estimated tax in four payments. For 2026 they are due April 15, June 15, September 15 and January 15, 2027.
If you buy marketplace health insurance, note that beginning with tax year 2026 the limit on repaying excess advance premium credits is gone, which makes income estimates important for drivers whose earnings swing from month to month. See estimated taxes and the self-employment tax guide.
Records to keep
Save every 1099, the app's annual tax summary and weekly earnings statements, a mileage log with odometer photos at the start and end of the year, fuel and repair receipts, and proof of insurance. A separate bank account keeps personal and business money apart.
How we can help
We prepare Schedule C returns for drivers, calculate whether standard mileage or actual expenses saves more tax, set up an estimated payment plan, and respond to IRS notices when 1099 totals do not match your return. See individual tax preparation or tax planning. This page is general information, not advice for your situation.
Frequently asked questions
Do I have to report tips if the app does not list them?
Yes. All tips are income. They may also qualify for the new deduction, but only if they are properly reported.
Can I deduct miles driven without a passenger?
Sometimes. It depends on whether the miles are business miles or commuting, and you need a log either way.
Am I an employee or a contractor?
Most gig drivers are treated as contractors, but classification depends on the facts. If you receive a W-2, you are an employee and generally cannot deduct vehicle costs.
What if my 1099-K is more than I earned?
A 1099-K shows gross payments before fees and refunds. Report it in full and deduct the fees and costs separately.
Official sources
- IRS: Publication 463, Travel, Gift, and Car Expenses
- IRS: 2026 business standard mileage rate
- IRS: List of tipped occupations
- IRS: Final regulations on tipped occupations
- IRS: One, Big, Beautiful Bill provisions
This page is a plain-language summary. The official source controls if there is any difference.
General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.