Gig Economy Taxes: What Uber, DoorDash, and Freelance Workers Need to Know
The gig economy has a tax problem. Not because the tax rules are especially punishing — though self-employment taxes do add up — but because most gig workers aren't told what they're getting into when they sign up to drive for Uber or deliver for DoorDash.
Traditional employees see taxes automatically withheld from every paycheck. Gig workers receive their full payment, and then — usually in a panic come April — discover they owe a large chunk of it. Some face penalties for not paying quarterly.
This guide explains the whole system so you're never blindsided.
Why Gig Work Taxes Are Different
When you're a traditional employee, your employer withholds federal income tax, state income tax, and pays half of your Social Security and Medicare taxes (FICA). Your half of FICA is 7.65% of wages.
When you're self-employed or a gig worker, you're both the employer and the employee. You pay both halves of FICA — the full 15.3%:
- Social Security: 12.4% on net self-employment income up to $176,100 (2026 cap)
- Medicare: 2.9% on all net self-employment income
- Additional Medicare Tax: 0.9% on net self-employment income above $200,000 (individual)
This 15.3% is called the self-employment (SE) tax, and it applies before you even calculate your income tax. It's the biggest shock for new gig workers.
The silver lining: you can deduct half of your SE tax when calculating your adjusted gross income, which reduces your income tax bill.
The 1099 System
Companies like Uber, DoorDash, Instacart, Lyft, and Fiverr pay independent contractors (gig workers) and report those payments to the IRS using Form 1099-NEC or 1099-K:
- 1099-NEC: For direct contract payments (freelance work, consulting)
- 1099-K: For payment app and marketplace payments (typically $5,000+ in 2024, threshold changes ongoing)
You'll receive 1099s in January for the prior year. But here's the critical point: you must report all gig income even if you don't receive a 1099. The IRS threshold for sending 1099s doesn't mean income below that threshold is tax-free — it's all reportable.
Uber, DoorDash, etc. will show your gross earnings on the 1099. But your taxable income is net earnings after expenses.
Deductible Expenses: What You Can Write Off
This is where you can meaningfully reduce your tax bill. Gig workers can deduct ordinary and necessary business expenses:
| Expense Category | Examples | Notes |
|---|---|---|
| Mileage | Driving to pick up orders, rides given | $0.70/mile (2025 rate; check current IRS rate) |
| Phone | Percentage used for work | Typically 50-80% of bill |
| Phone case, mount, charger | Gig accessories | Work-use portion |
| Data plan | Work-related data | Work-use percentage |
| Insulated bags, equipment | DoorDash delivery bags | 100% if work-only |
| Platform fees | Service fees deducted by platform | Already reflected in your net payout |
| Accounting software | QuickBooks Self-Employed, etc. | 100% deductible |
| Bank fees | Business account fees | If for business account |
| Health insurance premiums | If self-employed and not eligible for employer coverage | Deducted on Schedule 1, not Schedule C |
Mileage is typically your biggest deduction. For delivery and rideshare drivers, tracking every mile is critical. Use apps like MileIQ, Stride, or Everlance that log automatically.
Tracking Mileage Properly
The IRS requires a contemporaneous mileage log — meaning you track mileage as you drive, not reconstructed from memory later. A valid log includes:
- Date of each trip
- Starting and ending location (or odometer readings)
- Business purpose
- Miles driven
GPS-based apps make this automatic. You can also export a report at tax time. Keep records for at least 3 years.
Alternatively, some drivers deduct actual car expenses (gas, insurance, depreciation, maintenance) instead of mileage. You can't use both methods — pick the one that results in a larger deduction. Mileage is simpler and usually better unless you drive a very fuel-efficient car or have high actual expenses.
Quarterly Estimated Taxes
If you expect to owe $1,000 or more in federal taxes for the year, you must make quarterly estimated tax payments. Failure to pay enough quarterly can result in an underpayment penalty.
2026 estimated tax deadlines:
- April 15 — for income earned January 1–March 31
- June 16 — for income earned April 1–May 31
- September 15 — for income earned June 1–August 31
- January 15, 2027 — for income earned September 1–December 31
How much to pay: A safe harbor is paying 100% of last year's tax liability (or 110% if your prior year AGI exceeded $150,000) spread over four payments. This avoids any underpayment penalty even if you end up owing more this year.
Alternatively, pay 90% of your estimated current-year tax liability quarterly.
Practical approach for new gig workers: Set aside 25-30% of every gig payment in a separate savings account. Make quarterly payments from that account. At tax time, use whatever remains in the account to cover any final balance — or enjoy a small refund.
The Home Office Deduction
If you use part of your home exclusively and regularly for business — scheduling rides, managing your freelance operation, running your books — you may qualify for the home office deduction.
Simplified method: $5 per square foot of dedicated office space, up to 300 square feet ($1,500 max).
Regular method: Actual home expenses (rent, mortgage interest, utilities, insurance) × the percentage of your home used for business.
The "exclusive use" requirement is strict. A spare bedroom that also functions as a guest room doesn't qualify. A dedicated desk in a corner of a room where you also watch TV doesn't qualify. The space must be used only for business.
For gig drivers, the home office deduction rarely applies since the actual "office" is the car. For freelancers with a dedicated workspace, it's worth calculating both methods.
Retirement Accounts for Self-Employed People
Here's the upside of gig work tax status: access to retirement accounts with much higher contribution limits than employees.
SEP-IRA: Contribute up to 25% of net self-employment income, maximum $69,000 (2024). Easy to set up, contributions reduce your taxable income. Best for high earners with significant self-employment income.
Solo 401(k): For people with no employees. Employee contribution up to $23,500 (2026), plus employer contribution up to 25% of compensation. Total possible: $70,000 in 2026. More complex to administer but offers more flexibility.
Traditional IRA: Up to $7,000/year ($8,000 if age 50+). Deductibility phases out at higher income if you have an employer plan, but self-employed workers without an employer plan have full deductibility.
Even modest retirement contributions reduce your taxable income significantly. A $3,000 SEP-IRA contribution saves roughly $1,400 in combined SE tax + income tax for someone in the 22% bracket.
Filing: What You Need
Gig workers file their self-employment income on Schedule C (Profit or Loss from Business), attached to Form 1040. Schedule C calculates your net profit (income minus expenses).
Your net profit then flows to Schedule SE (Self-Employment Tax) to calculate your SE tax liability.
What you need to file:
- All 1099-NEC and 1099-K forms received
- Records of all deductible business expenses
- Mileage log
- Records of any quarterly estimated taxes paid
Software options:
- TurboTax Self-Employed or Premium: Guides you through Schedule C, handles 1099 imports
- H&R Block Premium: Comparable functionality at similar pricing
- TaxSlayer Self-Employed: Lower cost option
- Stride Tax: Free tax prep specifically for gig workers, with built-in mileage tracking
If your gig income is significant (over $30,000/year), consider a CPA or enrolled agent for the first year. The deductions they find often pay for their fee several times over.
The Bottom Line: Your Tax Checklist
| Task | Frequency |
|---|---|
| Track every business mile | Every trip |
| Save 25-30% of gig income for taxes | Every payment |
| Collect all receipts for business expenses | Ongoing |
| Make estimated tax payments | Quarterly (April, June, September, January) |
| Contribute to retirement account | Annually (before tax deadline) |
| File Schedule C with Form 1040 | By April 15 (or extension to October) |
Gig income taxes are manageable once you understand the system. The key moves: track your mileage obsessively, deduct every legitimate business expense, and never let a quarterly deadline catch you without money set aside.
Enjoyed this guide? Subscribe to Frugal Rise — a free newsletter covering practical personal finance tips, delivered weekly.