How Much Do DoorDashers Pay in Taxes?
DoorDashers, grasp your tax responsibilities as an independent contractor. This guide helps you confidently manage income, deductions, and payments.
As a DoorDasher, you operate as an independent contractor, not an employee. This classification means DoorDash does not withhold taxes from your earnings, placing the full responsibility for tax compliance on your shoulders. Understanding these tax obligations is important for managing your finances and avoiding unexpected tax liabilities.
Understanding Your DoorDash Income
Your taxable income as a DoorDasher includes all gross earnings from deliveries, tips, bonuses, and any other incentives received from the platform. All tips, whether received in cash or through the app, are subject to taxation.
DoorDash issues Form 1099-NEC, Nonemployee Compensation, to Dashers who earn $600 or more in a calendar year. Even if you earn less than $600 and do not receive a 1099-NEC, you must still report all your DoorDash income on your tax return. This income is generally reported on Schedule C, Profit or Loss from Business (Sole Proprietorship), when filing your federal income tax return.
Claiming Business Deductions
As an independent contractor, you can reduce your taxable income by claiming various business deductions. These deductions represent ordinary and necessary expenses incurred while performing your DoorDash activities.
Vehicle expenses are often the largest deduction for Dashers. You can choose between two methods: the standard mileage rate or actual expenses. For 2024, the standard mileage rate for business use is 67 cents per mile, which accounts for costs like gas, oil, repairs, insurance, and depreciation or lease payments. If you choose the standard mileage rate, you can still deduct tolls and parking fees separately. Alternatively, the actual expense method allows you to deduct the business-use percentage of all vehicle-related costs, including fuel, maintenance, insurance, and depreciation.
A portion of your cell phone and internet bill can also be deducted, reflecting the percentage used for DoorDashing, including data usage and service costs. Supplies purchased for deliveries, such as insulated bags, hot or cold bags, and chargers, are also deductible business expenses. Other potential deductions include roadside assistance, background check fees, and health insurance premiums if you are self-employed and not offered coverage through another employer.
Calculating Your Total Tax Burden
After identifying your gross income and eligible business deductions, your net income is subject to federal taxes. This total tax burden for DoorDashers primarily consists of self-employment tax and federal income tax.
Self-employment tax covers your contributions to Social Security and Medicare, which are typically split between an employer and an employee in traditional employment. As a self-employed individual, you are responsible for both portions. For 2024, the self-employment tax rate is 15.3%, consisting of 12.4% for Social Security and 2.9% for Medicare. This rate applies to 92.35% of your net self-employment earnings. For 2024, the Social Security portion of the tax applies to the first $168,600 of your combined wages, tips, and net earnings, while the Medicare portion applies to all net earnings.
After accounting for business expenses and a deduction for one-half of your self-employment tax, your remaining net income is subject to federal income tax. This income tax is calculated based on your individual tax bracket, which depends on your total income and filing status. You will use Schedule SE, Self-Employment Tax, to calculate your self-employment tax, and the net profit from your Schedule C feeds into this calculation.
Paying Your Estimated Taxes
Since DoorDash does not withhold taxes from your earnings, independent contractors must pay estimated taxes throughout the year to cover their tax liability. This pay-as-you-go system helps you avoid a large tax bill and potential penalties at tax time. Generally, you must pay estimated taxes if you expect to owe at least $1,000 in tax for the year.
Estimated tax payments are typically due quarterly. For the 2024 tax year, the approximate due dates are April 15 for the first quarter, June 17 for the second quarter, September 16 for the third quarter, and January 15, 2025, for the fourth quarter. If a due date falls on a weekend or holiday, the deadline shifts to the next business day.
You have several methods for paying estimated taxes. You can pay online through IRS Direct Pay or the Electronic Federal Tax Payment System (EFTPS). Other options include paying by mail with Form 1040-ES payment vouchers or through the IRS2Go mobile app. It is important to pay enough estimated tax by each due date to avoid potential underpayment penalties, which can be assessed if you pay less than 90% of your current year’s tax liability or 100% of your prior year’s tax liability (or 110% if your adjusted gross income was over $150,000).
Maintaining Accurate Records
Maintaining accurate and organized records of your income and expenses is important for fulfilling your tax obligations as a DoorDasher. Comprehensive record-keeping ensures accurate tax filing, provides necessary documentation if your tax return is ever reviewed, and allows you to track your business performance throughout the year.
You should consistently track all income received from DoorDash, including base pay, tips, and bonuses. Simultaneously, keep detailed records of all business expenses, such as mileage logs, fuel receipts, phone bills, and purchases of delivery supplies. Various methods can help with record-keeping, including spreadsheets, dedicated accounting software, or mobile applications designed for gig workers. Separating your personal and business finances by using a separate bank account can significantly simplify the tracking process.