Taxes and Deductions for DoorDash or Grubhub Drivers

Driving for DoorDash or Grubhub offers flexibility, but it also requires independent tax management. As independent contractors, drivers must track earnings, expenses, and tax obligations themselves. Without proper planning, unexpected tax bills can be costly.

Understanding deductible expenses, self-employment taxes, and estimated tax deadlines is essential. Keeping accurate records and addressing past work periods properly can make tax filing easier.

Classifying Earnings for Tax Purposes

Income from DoorDash or Grubhub is reported on Form 1099-NEC instead of a W-2, as drivers are independent contractors. This income is subject to self-employment tax rules. The IRS requires all earnings to be reported, even if a driver does not receive a 1099, which can happen if earnings from a single platform are below $600.

Since gig platforms do not withhold taxes, drivers must set aside money for federal and state taxes. Taxable income includes base pay, customer tips, and bonuses. Unlike W-2 employees, who have Social Security and Medicare taxes withheld, independent contractors must pay these taxes themselves.

Earnings from multiple platforms must be combined when calculating tax liability. If a driver works for both DoorDash and Grubhub, total income from both sources is used. Keeping accurate records of all payments ensures proper reporting and helps prevent IRS issues.

Deducting Work-Related Costs

Tracking deductions can significantly reduce taxable income. The largest deduction for most drivers is vehicle expenses. The IRS allows deductions using either the standard mileage rate or the actual expenses method. For 2024, the standard mileage rate is 67 cents per mile, covering fuel, maintenance, insurance, and depreciation. Drivers must keep a log of business miles, including dates, locations, and trip purposes.

The actual expenses method allows deductions for gas, repairs, lease payments, insurance, registration fees, and depreciation, based on the percentage of business use. If a driver uses their car 70% for work, they can deduct 70% of these costs. Comparing both methods helps determine the larger deduction.

Other deductible expenses include work-related portions of phone bills, accessories like phone mounts and chargers, and insulated bags or uniforms required by the platform. Parking fees and tolls incurred while making deliveries are deductible, but personal parking expenses are not. A roadside assistance plan used for work may also qualify.

Self-Employment Taxes

Independent contractors must pay both the employer and employee portions of Social Security and Medicare taxes, known as self-employment tax. For 2024, this tax is 15.3%, with 12.4% for Social Security (on income up to $168,600) and 2.9% for Medicare. Earnings above $200,000 for single filers or $250,000 for married couples filing jointly are subject to an additional 0.9% Medicare surtax.

To ease the burden, the IRS allows half of the self-employment tax to be deducted when calculating adjusted gross income. This does not reduce the tax owed but lowers taxable income, which can result in a lower overall tax bill. For example, if a driver owes $4,000 in self-employment tax, they can deduct $2,000 from taxable income. This deduction is claimed on Form 1040, Schedule SE.

Since gig workers do not have employer-sponsored retirement plans, they may consider a SEP IRA or Solo 401(k). These accounts offer tax-deductible contributions that grow tax-deferred. For 2024, SEP IRAs allow contributions up to 25% of net earnings, capped at $69,000, while Solo 401(k) plans permit up to $23,000 in employee contributions, plus additional employer contributions based on net income.

Estimated Tax Deadlines

Because gig income is not subject to automatic withholding, self-employed individuals must make quarterly estimated tax payments if they expect to owe at least $1,000 in taxes for the year. The deadlines for 2024 are April 15, June 17, September 16, and January 15, 2025. Missing these deadlines can result in penalties based on the amount owed and the length of the delay, calculated using the IRS underpayment interest rate, which changes quarterly.

To estimate payments, drivers can use the safe harbor rule, avoiding penalties by paying at least 90% of the current year’s tax liability or 100% of the prior year’s total tax bill (110% for those earning over $150,000). This provides a structured way to calculate payments without needing a precise earnings forecast.

Handling Past Work Periods

Drivers who previously worked for DoorDash or Grubhub but did not report income or pay taxes should take corrective action. The IRS requires all self-employment earnings to be reported, and failure to do so can lead to penalties, interest, or audits.

For those who failed to file a tax return, submitting a late return as soon as possible is the best option. The IRS typically imposes a failure-to-file penalty of 5% of the unpaid tax per month, up to 25%. If taxes were filed but underpaid, the failure-to-pay penalty is 0.5% per month, also capped at 25%. Interest accrues daily on unpaid balances at the federal short-term rate plus 3%. Setting up an installment agreement with the IRS can help avoid severe collection actions.

If income was not reported, amending prior tax returns using Form 1040-X is necessary. This form allows taxpayers to correct previously filed returns and include unreported earnings. If an IRS notice has already been received, responding promptly with accurate records, such as bank statements or platform earnings summaries, can help resolve the issue. In some cases, drivers may qualify for penalty relief if they can demonstrate reasonable cause, such as illness or reliance on incorrect tax advice. Seeking assistance from a tax professional can be beneficial for complex filing corrections or negotiations with the IRS.