What you need to drive Uber in Chicago

Chicago requires Uber drivers to hold a Transportation Network Company (TNC) license issued by the city's Department of Business Affairs and Consumer Protection (BACP). This is separate from a regular taxi medallion. You cannot legally drive for Uber in Chicago without it, and the city actively enforces this requirement.

The TNC license costs $265 per year and covers you to drive for any TNC platform — Uber, Lyft, or others — as long as you meet the underlying requirements. You explore through the BACP website, and the process typically takes two to four weeks. The license is not automatic; the city reviews your driving record, criminal history, and vehicle registration before approval.

Your vehicle must be registered in Illinois, pass a safety inspection, and be no more than 15 model years old (this age limit changes yearly). You also need a valid Illinois driver's license, proof of insurance that covers TNC driving, and a Social Security number or Individual Taxpayer Identification Number (ITIN) for tax reporting.

Key Takeaways

  • Chicago's Department of Business Affairs and Consumer Protection issues the TNC license required to drive for Uber; it costs $265 per year and takes two to four weeks to obtain.
  • Your vehicle must be registered in Illinois, pass a city safety inspection, and be no older than 15 model years; insurance must explicitly cover TNC driving.
  • You are responsible for self-employment taxes on all Uber income, including federal income tax, Social Security tax, and Medicare tax — Uber does not withhold these.
  • Chicago's TNC tax of 5 percent of each fare is deducted by Uber before payment reaches you, separate from your personal income tax obligation.
  • Deductible expenses include vehicle depreciation, fuel, maintenance, insurance premiums, and a portion of your phone bill — keeping detailed records is essential for tax time.

How to get your Chicago TNC license

Start at the BACP website (chicago.gov/bacp) and locate the Transportation Network Company License section. You will need to create an account, provide your personal information, driver's license number, and vehicle details, then upload proof of Illinois vehicle registration and proof of insurance.

The insurance requirement is specific: your policy must state that it covers "transportation network company" or "rideshare" driving. Standard personal auto insurance does not cover this work, and Uber's insurance does not replace your own policy — it fills gaps only during active rides. Many drivers use Metromile, State Farm, Geico, or Progressive, all of which offer TNC endorsements in Illinois. Costs vary but typically add $10 to $30 per month to a standard policy.

Once you submit your process, the city conducts a background check. If approved, you receive your license number by email. You then register that number with Uber through the app, and you can begin driving. If the city denies your process, it will explain why — usually a disqualifying criminal conviction or a serious driving violation — and you have the right to request reconsideration.

Understanding Chicago's TNC tax and what Uber deducts

Chicago imposes a 5 percent tax on each TNC ride. Uber collects this tax from passengers and remits it to the city on your behalf — you do not pay it directly. However, Uber deducts it from your driver earnings before the money reaches your account. If you earn $100 in fares before the tax, Uber pays you $95 and keeps $5 for the city.

This tax is separate from your personal income tax. The 5 percent is a city business tax; your income tax is owed to the federal government and Illinois. Many drivers confuse the two and think they are being double-taxed. They are not — the TNC tax is a fee on the service, and income tax is a tax on your profit.

Uber also deducts Uber's service fee (typically 25 to 30 percent of the fare) and any tolls or airport fees before paying you. These deductions appear in your weekly earnings statement in the app. The TNC tax is listed separately so you can see exactly what the city took.

Self-employment taxes you owe as an Uber driver

Because you are an independent contractor, not an employee, Uber does not withhold federal income tax, Social Security tax, or Medicare tax from your payments. You are responsible for paying these yourself, usually through quarterly estimated tax payments to the IRS.

Your self-employment tax rate is approximately 15.3 percent of your net profit (after expenses). This covers both the employer and employee portions of Social Security and Medicare. On top of that, you owe federal income tax at your marginal rate, which depends on your total income and filing status. Illinois also has a state income tax of 4.95 percent on your net profit.

To calculate what you owe, you need to track your income and expenses throughout the year. Uber sends you a Form 1099-NEC in January showing your gross earnings, but this does not account for your expenses or the TNC tax already deducted. You will need to file Schedule C (Profit or Loss from Business) with your tax return to report your actual profit.

Expenses you can deduct as a Chicago Uber driver

The IRS allows you to deduct ordinary and necessary business expenses. For Uber driving, this includes vehicle depreciation (or mileage, if you choose the standard mileage method), fuel, maintenance and repairs, insurance premiums, registration and license fees, and tolls and parking.

You can also deduct a portion of your phone bill if you use your phone for the Uber app — typically 20 to 30 percent of your monthly bill. Car washes, air fresheners, and interior cleaning are deductible. Meals and lodging are not, unless you are driving out of state and staying overnight (which is rare for Chicago drivers).

The easiest method is the standard mileage deduction. For 2024, the IRS allows you to deduct 67.5 cents per mile driven for business (this rate changes yearly). You straightforward track your total miles driven for Uber each year and multiply by the rate. You do not need to track fuel, maintenance, or depreciation separately — the mileage rate accounts for all of those. Keep a log or use the Uber app's mileage tracker to record your business miles.

Alternatively, you can deduct actual expenses: the cost of fuel, oil changes, tires, repairs, insurance, and depreciation. This method requires more record-keeping but may yield a larger deduction if your vehicle is expensive to maintain or has high depreciation. Most part-time drivers find the standard mileage method simpler.

What happens if you do not have a TNC license

Driving for Uber in Chicago without a TNC license is illegal. The city issues citations to unlicensed drivers, with fines starting at $500 per violation. Uber itself may deactivate your account if you cannot provide proof of a valid license. More importantly, if you are in an accident while driving without a license, your insurance may deny your claim, leaving you personally liable for damages.

The city also conducts periodic enforcement sweeps, checking driver records against the BACP license database. If you are caught, you face the fine and a requirement to stop driving until you obtain the license. The process is straightforward enough that the risk is not worth the time saved by skipping it.

Frequently Asked Questions

Can I drive for Uber in Chicago with an out-of-state driver's license?

No. You must have a valid Illinois driver's license to obtain a Chicago TNC license. If you recently moved to Illinois, you have 30 days to obtain an Illinois license. Uber will not set up your account without proof of an Illinois license and a valid TNC license from Chicago.

How long does the TNC license last, and do I have to renew it?

The TNC license is valid for one year from the date of issue. You must renew it annually by submitting a renewal process through the BACP website and paying the $265 fee again. Renewal typically takes one to two weeks. If your license expires, you cannot legally drive for Uber until you renew it.

What if my vehicle fails the safety inspection?

The city will tell you which items failed — usually broken lights, worn tires, or mechanical issues. You have 30 days to fix the problems and resubmit for inspection. Once your vehicle passes, you can proceed with your TNC license process. The inspection itself is free; you only pay for repairs.

Do I have to pay estimated taxes quarterly, or can I pay everything when I file my return?

The IRS expects you to pay estimated taxes quarterly if you expect to owe $1,000 or more in taxes for the year. Quarterly payments are due April 15, June 15, September 15, and January 15. If you do not pay quarterly and owe a large amount at tax time, you may face a penalty. Many drivers use tax software or a CPA to calculate their quarterly obligation based on their earnings.

Can I deduct the cost of my car if I bought it specifically to drive for Uber?

You cannot deduct the full purchase price, but you can deduct depreciation over the vehicle's useful life (typically five to seven years). If you use the standard mileage method, depreciation is already built into the per-mile rate, so you do not calculate it separately. If you use the actual expense method, you can deduct depreciation using IRS tables. Consult a tax professional to determine which method saves you more money.