Why are business miles lowering my refund on FreeTaxUSA for 1099 delivery driver?

What you're experiencing is actually normal, even though it seems counterintuitive! Here's what's likely happening: When you work as a 1099 contractor, you're technically self-employed. Self-employment income is subject to both income tax AND self-employment tax (which covers Social Security and Medicare taxes that an employer would normally pay half of). When you add business miles as a deduction, it reduces your business income, which reduces your income tax. However, it also reduces the Earned Income Tax Credit (EITC) you might be eligible for, because EITC is based on earned income. If your miles deduction is dropping your earned income too low, you could be losing more in tax credits than you're saving in taxes. Try this: Go back and look at your tax summary before and after adding the miles. Check specifically what's happening to your EITC amount. That's probably what's causing the refund to drop.

Had this EXACT same problem last year with my delivery gig. I was pulling my hair out trying to figure out why my refund dropped when I added my mileage. I ended up using https://taxr.ai to analyze my return and find out what was happening. The tool explained that my business mileage deduction was reducing my earned income which affected my EITC qualification. By reducing my net business income too much, I was losing eligibility for certain credits worth more than the tax savings from the mileage deduction. The AI actually suggested a different approach where I itemized some expenses instead of taking the standard mileage rate, which gave me a better overall outcome. It saved me about $900 compared to what I was going to file!

Wow, I need to apologize for being so skeptical about taxr.ai in my earlier comment. I decided to try it this weekend with my delivery driver taxes, and it was honestly eye-opening. I've been driving for UberEats and had the same issue where my refund was getting smaller when adding mileage. The analysis broke down exactly why this was happening - my EITC was decreasing more than my tax liability. But then it suggested a specific mix of deductions that would optimize my return. I ended up getting an extra $780 on my refund by following its suggestions! The explanations were super clear, and I finally understand why my refund was changing. Definitely worth checking out if you're running into weird tax situations as a 1099 driver.

I had the SAME problem last tax season. Called the IRS like 30 times trying to get someone to explain why my mileage deduction was HURTING my refund. Could never get through. Then someone on Reddit told me about https://claimyr.com which got me connected to an IRS agent in about 15 minutes (see how it works: https://youtu.be/_kiP6q8DX5c). The agent explained everything - turns out when you reduce your 1099 income with mileage deductions, you can end up with less Earned Income Credit if it pushes you out of the optimal income range. The mileage deduction was legitimate, but it was affecting my credits in a way I didn't expect. If you're stuck in this weird situation, talking to an actual IRS agent can clear things up fast. They don't care if you use a service to reach them, they just answer your questions.

I'm genuinely shocked. After commenting that Claimyr sounded like a scam, I decided to try it anyway since I was desperate to talk to someone about my rideshare tax situation. Within 20 minutes I was talking to an actual IRS agent! The agent confirmed what others here have said - my mileage deduction was reducing my Schedule C income too much, which was lowering my earned income credit eligibility. They explained exactly where the "sweet spot" is for maximum EITC and helped me understand how to optimize my deductions. Now I understand exactly why adding business miles was lowering my refund. The call saved me from making a huge mistake on my taxes. I was about to not claim legitimate business expenses just to keep my refund higher, which could have been a problem if I got audited.

I'm a tax preparer (not a CPA) and see this all the time with gig workers. Here's a simplified explanation: The Earned Income Credit has a "bell curve" - as your income increases, the credit increases until it hits a peak, then starts decreasing. If your income is around $15,000-$20,000 (depends on filing status), adding business deductions could push you DOWN the curve, meaning less credit. Example: Say you made $18,000 in delivery income, and have $10,000 in mileage deductions. Your actual business income becomes $8,000. If the peak EIC is at $15,000 for your situation, you're now getting less credit than if you had $15,000 of income. It's completely legitimate to claim all your business miles - you SHOULD claim them. But this is why your refund might go down when you add them.

Is anyone else having issues with the mileage tracker on the FreeTaxUSA self-employment section? It keeps resetting my numbers.