Taxing the Side Hustle: What Every Gig Worker Needs to Know About Taxes
If you've read the About Me section on my website, you'll know that I generate extra income for my family through various side gigs. I currently work for several gig platforms like Amazon Flex, DoorDash, UberEats, and others such as Roadie, Instacart, and Shipt. A common question I get when I mention my gig work is, "How are your earnings taxed?" As a gig worker driving for platforms like Amazon Flex, DoorDash, UberEats, Shipt, Instacart, or Roadie, you are considered to be self-employed. This means your taxes work a little differently compared to traditional W-2 employees and that taxes are not withheld from your paychecks throughout the year. It is extremely important to understand that your taxes are not withheld, as well as to understand what can be deducted and how you should track your deductions in case the IRS has questions on your reporting. In this blog post, I cover everything you need to know about taxes related to gig work.
How Is Gig Work Taxed?
As a gig worker, the Internal Revenue Service (IRS) classifies you as self-employed. So what does this mean for you? While you will be taxed very similarly to a W-2 employee, there are some slight differences:
Federal and State Income Taxes: You will pay regular income taxes on your net earnings, which is your total income after deductions. This is similar to a W-2 employee, but what you can deduct is different (I will discuss this later).
Social Security and Medicare Tax: As a self-employed individual, you are responsible for both the employer and employee portions of Social Security (12.4%) and Medicare (2.9%) taxes.
For example, if you earned $10,000 from gig work last year and had $4,000 in deductible expenses, you would pay taxes on the remaining $6,000.
Key Tax Forms and Schedules for Gig Workers
1099-NEC
The most common tax form a gig worker will receive is called a 1099-NEC form. NEC stands for non-employee compensation, or money earned as a self-employed independent contractor. Companies that pay you $600 or more in a calendar year are required to provide you with this form.
While I worked for all of the gig apps in 2024, I mainly worked for Amazon Flex and DoorDash and earned less than $600 from each of the other gig platforms. Therefore, I only received two 1099-NEC’s for tax year 2024.
Important: All gig work income must be reported, even if it is not reflected on a 1099 form. Tips received outside of the app directly from customers are expected to be reported. You are also required to report all income from gig work, regardless of the amount, even if it is under $600 and the platform does not issue a Form 1099. The IRS requires that all income be reported on your tax return, whether or not you receive an information return like a 1099-NEC form. It's important to keep accurate records of all your earnings from gig work to ensure you comply with tax laws
Schedule C (Profit or Loss from Business)
Schedule C is a report filed with your taxes to report income and expenses from your gig work. Gig workers, freelancers, or anyone else who is considered “self-employed” will fill out this Schedule and submit to the IRS each year.
I personally use TurboTax Self-Employed. All of the questions TurboTax asks you related to your gig-work will flow through into this Schedule C form. When you submit your taxes and receive a copy of the tax form submitted to the IRS, you will see this form included.
The purpose of this report is to calculate your net income, or your income after subtracting business expenses from your gross earnings.
This form helps the IRS figure out how much of your income is subject to taxes. As I mentioned previously, you are only responsible for paying taxes on your income after eligible business deductions are subtracted.
Legal Deductions to Reduce Your Taxable Income
A benefit of being classified as self-employed for tax purposes is that you can deduct eligible business-related expenses. First, I’ll start by explaining the two different methods for deducting your expenses for gig-work:
Two Methods for Vehicle Expense Deductions: It's crucial to track expenses and miles for business use. Keep a notebook in your car and jot down your odometer reading at the start and end of the year. I also highly recommend using mileage tracking apps to track the number of miles spent delivering. It’s important to note that you should only be deducting mileage spent during delivery and not the mileage spent going to and from your home from your starting and ending work location.
Actual Expenses Method: Add up all vehicle operating costs and multiply by the percentage of business use. This includes gas, oil, repairs, insurance, registration fees, lease payments, depreciation, and other vehicle-related costs. This can be cumbersome and difficult to keep track of.
Standard Mileage Method: Standard Mileage Method: Simplifies record-keeping by tracking total mileage and business miles. Track business miles driven and multiply by the standard mileage rate (70 cents per mile for 2025). Example, if you drove 2,000 miles for gig work and earned $7,000 in income, you could deduct $1,400 (2,000 miles x $0.70) from the $7,000 and only pay taxes on $5,600 in net income.
Tax Implications:
Deducting vehicle expenses reduces taxable income and self-employment tax. If you are not deducting your vehicle expenses, you are paying more in taxes than you need to be. This is extremely important for rideshare drivers who have significant vehicle-related expenses.
Best Mileage Tracking Apps for Side Gigs:
Stride: My go-to mileage app. It's free and designed for gig workers. It tracks mileage automatically using real-time GPS. It also allows you to track other related business expenses. The detailed tax summaries are perfect.
Everlance: A good second app to look at if you want to use separate apps for second gigs. It similarly tracks mileage via GPS and allows you to easily classify trips as business or personal. It offers great customizable reports for tax filing.
Quarterly Taxes
The IRS requires self-employed gig workers to pay quarterly estimated taxes if they expect to owe at least $1,000 in taxes for the year. This avoids you having a large tax burden at the end of the year and ensure that the IRS gets their money. You can use IRS Form 1040-ES to file and the filing deadlines are the 15th of April, June, September, and January of the following year.
Tips for Handling Taxes
Set aside money to ease the year-end tax liability: I set aside 20-30% of each paycheck for taxes.
Automate your tracking using mileage gig apps: For some apps you are able to get a mileage report based on the route sent to your phone, but they may not be reflective of the actual route taken (e.g. Detours or traffic). These reports also may come later in the tax season which can delay the time before you can file. You don’t want to guess and over- or underestimate your net earnings.
Consult a CPA Tax Professional
Conclusion
Navigating taxes as a gig worker can be complicated, especially if you work for multiple services. It’s extremely important to automate your tracking and to stay organized. By being diligent and tracking your income and expenses, taking advantage of deductions, and paying quarterly taxes, you can maximize your earnings and minimize year-end stress just after the holidays.
Do you have any go-to tolls or strategies for managing taxes as a gig worker? Let me know in the comments or share your tips- let’s help each other out!
Disclaimer: The information in this blog is for general informational purposes only and is not intended as financial, tax, or legal advice. It is based on personal research, experience, and interpretation of tax-related topics. While I strive to ensure the timeliness and accuracy of the information presented, tax laws are regulations are complex, subject to change, and can vary based on individual circumstances. The use of this information is at your own risk.
Consult a professional: I am not a certified tax professional or financial advisor. Consult with a qualified tax professional or accountant who can provide advice tailored to your unique decisions before making any financial or tax decisions. By using this site, you acknowledge and agree to this disclaimer.