2018 New tax law creates a huge Advantage for Uber and Lyft drivers
The new tax law creates a huge boon for Uber and Lyft drivers
The new tax law gives a slightly unintentional benefit to gig economy workers and independent contractors.
Uber drivers, Lyft drivers, freelancers and other independent contractors will be able to deduct 20 percent of their income before paying the new lower tax rates.
By 2020, gig economy workers are expected to make up 43 percent of the American workforce, according to research from TurboTax maker Intuit.
The new tax law is likely to accelerate a hotly disputed trend in the American economy by rewarding workers who sever formal relationships with their employers and become contractors.
Management consultants may soon strike out on their own, and stockbrokers may hang out their own shingle.
More cable repairmen and delivery drivers, some of whom find work through gig economy apps like Uber, may also be lured into contracting arrangements.
Uber drivers, Lyft drivers, freelancers and other independent contractors will be able to deduct 20 percent of their income from their taxable income before paying the new lower tax rates. This goes into effect when people file their 2018 income taxes.
Gig economy workers through services such as Uber, Lyft and TaskRabbit, as well as IT consultants in Silicon Valley, management consultants and even stockbrokers who forgo benefits and certain legal protections to work as independent contractors all qualify for this deduction.
The gig economy is rapidly growing and expected to make up 43 percent of the American workforce in two years, according to research from TurboTax maker Intuit. By 2020, 7.6 million people will be working in the gig economy, double the 3.2 million gig economy workers from 2015.
The tax savings, which could be around $15,000 per year for many affluent couples, may prove enticing to workers. “If you’re above the median but not at the very, very top, one would think you’d be thinking it through,” said David Kamin, a professor of tax law at New York University.
1. Specified service businesses: This includes virtually every occupation that provides a personal service other than engineering and architecture. If your taxable income exceeds a threshold of $157,500 for single filers and $315,000 for joint filers, the deduction is reduced pro-rata under the “phase-in rule.” The phase-in is complete when income reaches $207,500 for single filers and $415,000 for joint filers. Above these upper thresholds, you get no deduction—period.