How DoorDash Taxes Work: A Guide for Drivers

DoorDash drivers operate as independent contractors, not traditional employees. This classification means drivers are responsible for managing their own tax obligations. Understanding these responsibilities is important for accurately reporting income and claiming eligible deductions. This guide clarifies the tax implications associated with DoorDash earnings, from identifying income to filing your annual return.

Understanding DoorDash Income

DoorDash earnings are taxable income. This includes base pay from completed deliveries, customer tips, bonuses, and other incentives received directly from DoorDash. This gross income must be reported.

DoorDash reports a driver’s gross earnings to both the driver and the Internal Revenue Service (IRS) using Form 1099-NEC if earnings reach or exceed $600. Even if a driver does not receive a 1099-NEC, all income received from DoorDash must still be reported on their tax return.

Identifying Deductible Business Expenses

Independent contractors can reduce their taxable income by deducting ordinary and necessary business expenses. An expense is considered ordinary if it is common and accepted in the trade or business, and necessary if it is helpful and appropriate for the business. Maintaining meticulous records, such as receipts, mileage logs, and bank statements, is important for substantiating these deductions.

Vehicle expenses represent a significant deduction for DoorDash drivers and can be calculated using one of two methods. The standard mileage rate method allows drivers to deduct a set amount per business mile driven, which for 2024 is 67 cents per mile. This rate covers fuel, maintenance, depreciation, and insurance. The alternative is the actual expense method, which permits deducting the specific costs incurred for fuel, oil, repairs, insurance, vehicle registration fees, and depreciation directly attributable to business use.

Expenses related to communication and supplies are also deductible. A portion of a driver’s cell phone and internet bill can be deducted, corresponding to the percentage of time these services are used for DoorDash business. Other common deductions include insulated delivery bags, car chargers, road tolls, and parking fees incurred while actively making deliveries.

Drivers who are self-employed and not eligible for an employer-sponsored health insurance plan may also be able to deduct health insurance premiums. This deduction can be taken for premiums paid for medical, dental, and qualified long-term care insurance for themselves, their spouse, and dependents. The deduction cannot exceed the net earnings from their DoorDash business.

Navigating Self-Employment Taxes

DoorDash drivers, as independent contractors, are responsible for paying self-employment tax (SE tax) in addition to income tax. Self-employment tax funds Social Security and Medicare benefits, which are typically withheld from an employee’s paycheck. The self-employment tax rate is 15.3% on net earnings from self-employment.

This 15.3% rate consists of two parts: 12.4% for Social Security up to an annual earnings limit ($168,600 for 2024) and 2.9% for Medicare with no earnings limit. This tax applies to the net earnings from self-employment, which is the gross income minus allowable business expenses. For example, if a driver’s net earnings are $10,000, their self-employment tax calculation would begin with that amount.

A benefit for self-employed individuals is that they can deduct one-half of their self-employment tax paid from their gross income when calculating their adjusted gross income (AGI). This deduction helps offset the burden of paying both the employer and employee portions of Social Security and Medicare taxes. This adjustment on Form 1040 reduces the amount of income subject to income tax.

Estimating and Paying Quarterly Taxes

Independent contractors are required to pay estimated taxes quarterly throughout the year if they expect to owe at least $1,000 in taxes. This system ensures that taxpayers pay income tax and self-employment tax as they earn income, rather than waiting until the annual tax filing deadline. Failure to pay enough tax through withholding or estimated payments can result in penalties.

The tax year is divided into four payment periods, each with specific due dates:

• April 15 for earnings from January 1 to March 31
• June 15 for earnings from April 1 to May 31
• September 15 for earnings from June 1 to August 31
• January 15 of the following year for earnings from September 1 to December 31

If a due date falls on a weekend or holiday, the deadline shifts to the next business day.

Estimating quarterly tax payments involves projecting current year’s income, accounting for all deductible business expenses, and then calculating the expected tax liability. Drivers can use their prior year’s tax liability as a safe harbor, paying 100% of the previous year’s tax (or 110% if their adjusted gross income was over $150,000). Alternatively, they can estimate their current year’s income and deductions more precisely. The IRS provides Form 1040-ES with worksheets to assist in this calculation.

Payments can be made electronically through IRS Direct Pay, the Electronic Federal Tax Payment System (EFTPS), or by mail using a payment voucher from Form 1040-ES. Paying estimated taxes accurately and on time helps avoid underpayment penalties, which are assessed if too little tax is paid throughout the year. These penalties are calculated based on the amount of underpayment and the period it remained unpaid.

Filing Your Annual Tax Return

The annual tax return process for DoorDash drivers involves specific forms that report business income, expenses, and self-employment tax. The primary form used is Schedule C, where drivers report their gross income earned from DoorDash. All deductible business expenses, such as vehicle costs, phone expenses, and supplies, are also itemized on this schedule.

The net profit or loss calculated on Schedule C then transfers to Form 1040. This net profit becomes part of the driver’s total income, which is then subject to income tax. This integration ensures that business earnings are properly accounted for within the overall personal income tax calculation.

Self-employment tax is calculated separately on Schedule SE. The net earnings from Schedule C are used to determine the amount subject to Social Security and Medicare taxes. The calculated self-employment tax from Schedule SE is then also reported on Form 1040. The annual tax filing deadline is April 15.