Sure-Fire Secrets to Profiting From the Gig Economy
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Sure-Fire Secrets to Profiting From the Gig Economy
The gig economy is really taking off. You’ve probably heard of Uber and Air BnB, but have you heard about Postmates, Doordash, Turo, Homeaway, Boatbound, Turning Art, Parkingpanda, Closet Collective, Grubhub, Instacart, Amazon Flex, TaskRabbit, Dolly, Dogvaca, Hubstaff, Fiverr, Urban Massage, Upcounsel, Homehero, Lawnlove, Udemy, Glamsquad, and thousands more!!! The gig economy is really changing the way we work.
Uber is easy, and we will use Uber as an example, but the same concepts and rules apply to all of the gig economy businesses. Are you an Uber driver? Uber drivers can take tax write-offs as a business-owner. You can deduct payments for apps you use on the road, for water/refreshments you supply to riders, and for your home office to account for mileage, tips, etc.
Writing Off the Uber Automobile
In terms of writing-off your Uber automobile, you can use mileage or actual (lease or own). The mileage method is simple and you can track it manually or use an App like MileIQ, or even an old-fashioned memo pad in the glove box. The actual method may be beneficial for people who own or lease and have more complex scenarios where the actual expenses may go above and beyond the IRS mileage rate of 54.4 cents per mile. For new cars, you can take bonus depreciation, and owners can write-off gas, maintenance, etc., so make sure you use the same credit card for all gas and maintenance or keep your receipts.
Making Sure to Manage Your Estimated Payments
You will receive a 1099 from Uber… So, you have to be sure to make an allowance for required Estimated Payments. A good idea is to use one period to get an average and then put aside on a ratable basis what you think you’ll owe (25% is also a good rule of thumb) into a separate savings account. You don’t want to get hung up at the end of the year with a tax bill for which there was no withholding and find yourself with no money to pay a big tax bill.
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* $10,000 for Year 1 or $18,000 if you claim first-year bonus deprecation for a "luxury vehicle."
* $16,000 for Year 2
* $9,600 for Year 3
* $5,760 for Year 4 and thereafter until the vehicle is fully depreciated
If you don’t use the vehicle 100% for business, these allowances are cut back proportionately. These allowances will be indexed for inflation for 2019 and beyond.
However you cut it, and you need to look at each individual situation, you are going to have a lot of tax breaks and advantages for the purchase, use and commensurate expenses for your Turo business. These range from the QBI deduction (which requires a pass-through entity), to the bonus depreciation, to normal business deductions for mileage or actual expenses (gas, repairs & maintenance, home office [also requires entity], legal/accounting, supplies, etc. Much of the business income generated will be tax-free or taxed at a low effective rate, potentially 8-11% versus 24-37% for your wage income.