Do You Pay Taxes as a DoorDash Driver?
Understand your tax obligations as a DoorDash driver. Learn how to manage income, expenses, and payments for self-employment.
As a DoorDash driver, you operate as an independent contractor, not an employee. This means you are personally responsible for managing and paying your own income and self-employment taxes throughout the year, unlike traditional employees who have taxes withheld from their paychecks.
Understanding Your Taxable Income
Your taxable income as a DoorDash driver includes all delivery pay, customer tips, and any bonuses received from the platform. Accurately track all funds received to ensure proper reporting of your total income.
From this gross income, you can subtract eligible business expenses, which significantly reduce your overall taxable amount. These deductions include costs directly related to your driving activity. Vehicle expenses are a common and substantial deduction, and you have two methods to calculate them.
You can either deduct the actual costs of operating your vehicle, which involves tracking all expenses like gas, oil changes, repairs, insurance, and depreciation. Alternatively, drivers can opt for the standard mileage rate, a simpler approach. For 2024, the business standard mileage rate is 67 cents per mile driven for work purposes. This rate accounts for both fixed and variable costs of operating your vehicle.
Beyond vehicle expenses, other costs are deductible. This includes a portion of your cell phone expenses used for DoorDash activities, and the cost of insulated bags or other specialized equipment for deliveries. Tolls incurred during deliveries and parking fees are also deductible. If you use a dedicated space in your home exclusively and regularly for your DoorDash business, a portion of your home office expenses are also deductible, provided it meets specific IRS criteria.
Types of Taxes Applicable to Drivers
As an independent contractor, you are subject to self-employment tax, which funds Social Security and Medicare. This tax is a combination of both the employer and employee portions of these contributions, totaling 15.3%. Specifically, 12.4% is allocated to Social Security, applicable on net earnings up to $168,600 for 2024. The remaining 2.9% goes to Medicare, applied to all net earnings without an income cap. This tax is calculated on 92.35% of your net earnings from self-employment.
In addition to self-employment tax, your net earnings from DoorDash are also subject to federal income tax. The amount of federal income tax you owe depends on your overall taxable income from all sources, your filing status, and any applicable deductions or credits. State income tax can also apply, depending on where you reside and operate your business. These income taxes are separate from the self-employment tax and are determined by your total financial picture.
Reporting Your Income and Paying Taxes
DoorDash typically issues Form 1099-NEC, Nonemployee Compensation, to drivers who earn $600 or more in a calendar year. This form reports your gross earnings to both you and the Internal Revenue Service (IRS). Even if you do not receive a 1099-NEC, you are still required to report all income earned.
You will report your DoorDash income and expenses on Schedule C, Profit or Loss from Business, which is filed with your Form 1040, U.S. Individual Income Tax Return. Schedule C is where you detail your gross earnings and list all your eligible business deductions. The calculation on Schedule C results in your net profit or loss from your DoorDash activities, which then flows to your Form 1040 to determine your overall taxable income.
Since taxes are not withheld from your DoorDash earnings, you are required to pay estimated taxes throughout the year. These payments are made quarterly to cover your income tax and self-employment tax obligations. The due dates for these quarterly payments are April 15, June 15, September 15, and January 15 of the following year. Failing to pay enough estimated tax throughout the year can result in underpayment penalties.
You have several options for making estimated tax payments. The IRS offers online payment portals, such as IRS Direct Pay, or you can use the Electronic Federal Tax Payment System (EFTPS). Payments can also be mailed in with Form 1040-ES, Estimated Tax for Individuals, or made through certain tax software or payment apps. Selecting a method that fits your financial routine can help ensure timely payments and avoid penalties.
Essential Record Keeping
Maintaining accurate and detailed records is important for any independent contractor, including DoorDash drivers. Comprehensive records allow you to precisely calculate your income and identify all eligible deductions. This approach ensures that you report your earnings accurately and minimize your taxable income, potentially reducing your tax liability.
Effective record keeping is important documentation in the event of an IRS audit. Should your tax return be reviewed, having organized records to substantiate your reported income and claimed expenses is essential. This evidence can prevent disputes and demonstrate your compliance with tax regulations. Without proper documentation, deductions may be disallowed, leading to additional tax, penalties, and interest.
Drivers can use various methods for keeping track of financial information. Many utilize mileage tracking applications on their smartphones to automatically log business miles, simplifying vehicle expense calculations. Digital or physical files for receipts, bank statements showing DoorDash deposits, and earnings summaries provided by DoorDash are also important. Utilizing spreadsheets or accounting software can streamline the process, providing a clear overview of your financial activity throughout the year.