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What you can legally deduct as a driver, freelancer, or seller — and how to claim it correctly.
Every dollar you legitimately deduct is a dollar the IRS doesn't tax — and gig workers often leave money on the table simply because they don't realize how much of what they already spend to do the work actually qualifies. This lesson walks through the most common, IRS-recognized deductions available to drivers, freelancers, and sellers.
The IRS allows you to deduct expenses that are both ordinary (common and accepted in your line of work) and necessary (helpful and appropriate for your business) — the expense doesn't have to be indispensable, just a normal part of doing the work. Deductions reduce your taxable profit, not your tax bill directly: a $1,000 deduction doesn't save you $1,000 in tax, it reduces the income you're taxed on by $1,000.
For rideshare and delivery drivers, this is usually the single largest deduction available. You have two methods to choose from — and you must pick one for the year, you can't mix them for the same vehicle.
| Method | How It Works | Best For |
|---|---|---|
| Standard mileage rate | Deduct a fixed cents-per-mile rate (set annually by the IRS) for every business mile driven, tracked separately from personal miles | Most rideshare/delivery drivers — simpler to track and often yields a larger deduction |
| Actual expense method | Deduct the actual business-use percentage of gas, insurance, repairs, depreciation, and registration | Drivers with an expensive-to-run or newer vehicle where actual costs exceed the standard rate |
Whichever method you use, you need a mileage log — the odometer reading at the start and end of the year, plus a record of business trips (date, purpose, miles driven). Apps that auto-track mileage using GPS are far more reliable than trying to reconstruct a log at tax time from memory.
If you use part of your home regularly and exclusively for business — a dedicated desk for freelance work, a space for packing Etsy orders — you may qualify for a home office deduction.
| Method | How It Works |
|---|---|
| Simplified method | Deduct a flat rate per square foot of dedicated office space, up to a maximum square footage — easy to calculate, no receipts needed |
| Regular method | Deduct the business-use percentage of actual home expenses (rent/mortgage interest, utilities, insurance, repairs) based on the office's share of your home's total square footage |
The key requirement is exclusive use — a kitchen table you also eat dinner at doesn't qualify, even if you do freelance work there sometimes. A spare room or a clearly defined desk area used only for the business does.
Items you buy specifically to do the work are generally deductible:
If you use your personal phone and home internet for both business and personal purposes — which is the norm for most gig workers — you can deduct the business-use percentage of the bill. If half your phone use is for work, you could reasonably deduct roughly half the monthly bill. This requires a reasonable, defensible estimate, not an exact stopwatch measurement, but it should reflect genuine usage patterns rather than a round number picked out of convenience.
| Expense | Deductible? |
|---|---|
| Rideshare/delivery-specific insurance rider | Yes — the incremental cost above your personal auto policy |
| Platform commission or service fees (Uber's cut, Etsy's transaction fees) | Yes — these are already netted out of your payout in most cases, but confirm against your 1099 |
| Business liability insurance | Yes, if you carry it for the business |
| Health insurance premiums (self-employed) | Often deductible, but claimed differently — as an above-the-line deduction on your personal return, not a Schedule C business expense |
1. Not tracking mileage at all, then estimating at year-end. A rough guess is far less defensible than a contemporaneous log, and you'll likely underclaim what you actually earned in deductions.
2. Deducting 100% of a mixed-use expense. Your phone, internet, and vehicle are rarely 100% business — only the business-use portion is deductible, and claiming the full amount is a common audit trigger.
3. Forgetting smaller recurring expenses. Platform fees, small supply purchases, and software subscriptions add up over a year and are easy to overlook without a system for tracking them (Lesson 5 covers this).
4. Skipping the home office deduction out of audit fear. A properly documented, exclusively-used space is a legitimate deduction — the fear is often outsized compared to the actual risk if the requirements are genuinely met.
Key Takeaway: Mileage, home office space, supplies, a portion of your phone and internet, and platform fees are all fair game as deductions — as long as they're genuinely tied to the business and reasonably documented. The next lesson covers exactly how to track all of this so you're not scrambling to reconstruct records at tax time. Next, see Tracking Income and Expenses Like a Pro.
If you use the standard mileage rate the first year you use a vehicle for business, you can generally switch to the actual expense method in later years. However, if you start with the actual expense method (and claim certain types of depreciation), you may be locked into that method for the life of the vehicle. Choosing standard mileage first keeps your options open.
For most expenses, yes — keep receipts or digital records. Very small cash expenses without receipts are harder to substantiate if questioned, so it's best to use a card or app that creates an automatic record whenever possible, rather than relying on memory.
Not directly as a one-time expense. If you use the standard mileage rate, vehicle wear-and-tear is already factored into that per-mile rate. If you use the actual expense method, the vehicle's cost is recovered gradually through depreciation rather than deducted all at once.
Coffee shop purchases while working aren't a home office deduction, but a reasonable business-meal portion of what you buy there may be partially deductible in certain circumstances. It's a different category of deduction than home office space, and generally a smaller one — the home office deduction specifically requires a dedicated space in your home.
It's a commonly cited concern, but a properly qualifying, well-documented home office deduction is a legitimate and commonly claimed deduction for self-employed people. The risk comes from claiming space that doesn't meet the exclusive-use requirement, not from claiming the deduction itself.
Disclaimer: This article is for general educational purposes only and does not constitute personalized financial, investment, tax, or legal advice. Figures, rates, and rules mentioned may change over time — verify current details with an official source or a qualified professional before making financial decisions.