Editor’s Note: The following is a guest blog post by Paul Koullick, Product Manager at Stride.
Meet Alice, a new driver partner with Uber. This is Alice’s first time working independently.
Alice knows that, as an independent worker, taxes won’t be withheld automatically from her earnings, and heard from a friend that she should be setting aside about 30% to cover her tax bill. Then using Stride to track her earnings and business expenses, Alice found that she only needs to set aside about 9% of her earnings for taxes — 21 percentage points less than she expected. To date, driver partners like Alice have used Stride to claim more than $60M in tax deductions, reducing their taxable income and helping them keep more of their earnings.
Here’s how this is possible: A 30% effective tax rate is a commonly used rule-of-thumb for independent contractors. This rate combines federal, state, and self-employment taxes, while making some assumptions about household size and income bracket.
But 30% of earnings is far more than Alice should be paying in taxes. What Alice, her friend, and most other driver partners don’t realize is the jaw-dropping amount of money they can save in taxes by deducting business expenses and miles driven for work. As an independent contractor, Alice can actually claim tax deductions for many of her day-to-day expenses: The miles she puts on her car, the new phone and car holder she’ll need, her monthly health insurance premium, and her weekly car wash to name a few. Most driver partners simply aren’t aware of everything they can deduct.
The financial impact for driver partners who track these deductions is significant. In a recent survey, we found that driver partners who track these business expenses don’t need to set aside anywhere close to 30%. In fact, the typical driver partner using our mileage and expense tracking app Stride Drive can easily claim so many deductions that they owe just 8.7%. Compared to what driver partners who don’t track expenses would owe, their tax rate is 21 percentage points lower — keeping significantly more money in their pockets. That’s huge.
Helping driver partners see the financial impact of tracking deductions
Most driver partners don’t track their business deductions. People think it takes too much effort or time, and don’t realize how much it can impact their bottom line.
That’s why Stride built the Tax Calculator. With just a few clicks, Stride shows driver partners how much they should expect to owe in taxes and how much they could stand to gain from tracking more deductions.
As our CEO Noah Lang describes it, “Stride’s partnership with Uber is an unrivaled opportunity for us to deeply integrate products to serve driver partners throughout the year. I’m especially excited about how we’re using the Uber Driver API to provide any driver partner the simplest way to estimate their expected taxes.”
How we built the Tax Calculator using the Uber Driver API
Stride uses the Uber Driver API to retrieve an entire year’s worth of earnings and trips data for a driver partner. The Tax Calculator parses apart the various payments, removes basic deductions like fees and on-trip mileage, and gives each driver partner a simple tax summary of their earnings and estimated taxes.
In order to generate each driver partner’s annual tax estimate in real-time (10–15 seconds), we parallelize pulling data from the /partners/payments and /partners/trips endpoints to aggregate annual earnings data including incentives and referral payments, remove on-trip mileage deductions, and unify the result to present it in a way that’s helpful to the driver partners.
Year-round, we’re showing driver partners how much of their earnings they should set aside, so when tax time comes around, driver partners are financially prepared and understand how to keep more of their earnings.
We’re thrilled about this first integration with Uber’s Driver API. We’ve already generated tens of thousands of tax summaries, and helped driver partners claim more than $60M in tax deductions. In partnership with the Uber API team, we look forward to continuing to stitch together our two products to support driver partners with a full suite of benefits that puts money back in their pockets.
Stride Health is a growing suite of benefits for independents, connecting independent workers with health insurance, healthcare and tax compliance support. Our mission is to empower the 53 million independent working Americans to take control of their physical and financial health.
Based in San Francisco and available nationwide, Stride Health launched in early 2014 and is venture-backed by leading health and consumer finance firms Venrock, New Enterprise Associates, and Fidelity’s F-Prime Capital.
*Stride Health is not a personal tax advisor. The information above is meant only for guidance purposes and not as professional legal or tax advice.
**Uber does not give legal or tax advice.