Tax Deductions for TLC Drivers: What Counts and What Doesn't

In short: as a self-employed TLC driver you can deduct costs that are ordinary and necessary for your driving business — the IRS defines "ordinary" as common and accepted in your field and "necessary" as helpful and appropriate (IRS Pub 334). For drivers the big ones are the car (mileage rate or actual costs), tolls and business parking, fees the app or fleet took, and licenses and regulatory fees. Some things are never deductible: TLC summonses and other tickets, commuting and ordinary clothes (NYS checklist).

Each item below links to the official rule. If something is partly personal (your phone, a car you also use for family), only the business part counts. This is general information, not tax advice.

The master list

What a deduction is worth

A deduction lowers your profit, and two taxes are figured on that profit. Here is the arithmetic for $1,000 of extra deductible cost, using only published rates:

• Self-employment tax: $1,000 × 92.35% × 15.3% = about $141 less (while your earnings are under the Social Security wage base; see self-employment tax).
• Income tax: $1,000 × your own federal, NYS and NYC rate. That depends on your total income, so we don't guess it here.
• MCTMT, if you owe it: $1,000 × 0.60% = $6 less in NYC (2025 rate).

So a $1,000 cost does not save you $1,000 — it saves a share. Don't spend money just to get a deduction. The useful habit is the opposite: make sure every real driving cost you already pay is recorded, so none of it is missed at tax time.

The car: one method or the other

You pick either the IRS standard mileage rate or actual expenses for each car each year — not both. With the mileage rate, you can't add depreciation, lease payments, repairs, gas, oil, insurance or registration for that car (Pub 463). Actual expenses, per Pub 463, include depreciation, lease payments, registration fees, licenses, insurance, repairs, gas, garage rent, tires, oil, tolls and parking, times your business-use share.

Rules about which method you can use (first-year choice, whole-lease lock-in, no standard rate with 5+ cars at once) are in standard mileage vs actual expenses. Weekly TLC car rentals: can I deduct my TLC car rental?

Tolls and parking

Business tolls and parking are deductible on top of either car method. Parking at your regular place of work is commuting and isn't. And a toll you were paid back for — by the passenger in a taxi, or by the app (TLC rule 59D-17(c) requires high-volume apps to remit the entire toll you paid on a dispatched trip) — is not your cost. Details: can I deduct tolls and parking?

Fees taken out before you were paid

The IRS says the gross amount on a 1099-K isn't adjusted for fees and similar items, and that these items are not taxable income — you can deduct them from the gross (IRS). For app drivers, TLC requires the app to itemize what it deducted from the 1099-K gross (guide). For taxi drivers, the fleet's driver pay report shows what the leasing agent took out of card payments, such as the card processing surcharge (taxi taxes).

Licenses, fees and other business costs

IRS Publication 334's list of other expenses you may be able to deduct includes licenses and regulatory fees, bank fees, supplies and materials, education expenses and repairs and maintenance to business property (Pub 334). For a TLC driver, costs of keeping your license and vehicle legal to work fit under "licenses and regulatory fees." Whether a specific course or exam counts as deductible education depends on facts — ask a preparer.

Mixed-use items. Pub 334 says if an expense is partly business and partly personal, separate the personal part, which is generally not deductible. Your phone is the common example: keep a reasonable record of how much is for driving.

Below-the-line items for the self-employed

• Half of self-employment tax is deducted when figuring adjusted gross income (IRS). It lowers income tax, not SE tax. See self-employment tax.
• Self-employed health insurance: you may be able to deduct medical and dental insurance premiums for you and your family (Pub 334; conditions apply).
• Qualified tips (2025–2028): up to $25,000, but not more than your net driving income. See no tax on tips.

Car loan interest: two different rules

1. Business interest. Pub 463 and Pub 334 say a self-employed person who uses a car in the business can deduct the business-use share of car loan interest — for example, 60% business use means 60% of the interest. Pub 463 says this is allowed even if you use the standard mileage rate.
2. The new 2025–2028 car loan interest deduction (up to $10,000, phase-out over $100,000 MAGI / $200,000 joint) is only for a vehicle bought for personal use — "not for business or commercial use" — new, final assembly in the US, loan after December 31, 2024 (IRS FS-2025-03). A car bought mainly to drive for hire may not fit that description; the Schedule 1-A instructions set the test, so check them with a preparer. Pub 463 adds that if you're eligible under both rules you can't deduct the same interest twice.

Never deductible

NYS's driver checklist says you may not deduct: clothing or laundry (unless a mandated uniform), meals not connected to business travel outside your metropolitan area (35 miles), commuting or travel expenses, and tickets or summonses (NYS). IRS Publication 334 also lists penalties and fines paid to a government agency because you broke the law and personal, living and family expenses as not deductible. That covers TLC and OATH penalties, parking tickets and camera tickets — see can I deduct TLC fines?

Keep records

Pub 463 says you can't deduct amounts you approximate or estimate, and you should keep records generally for 3 years from filing. If NYS asks, it wants records covering at least six months of the year (NYS letter checklist).