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TAX-STRATEGY Gig Economy Taxes: What Uber, DoorDash, and Freelanc... 2026-02-27 · 6 min read · gig economy · self-employment taxes · freelance taxes

Gig Economy Taxes: What Uber, DoorDash, and Freelance Workers Need to Know

tax-strategy 2026-02-27 · 6 min read gig economy self-employment taxes freelance taxes 1099 quarterly taxes

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%:

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:

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:

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:

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:

Software options:

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.


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