Gig economy taxes: drivers, delivery, freelancers and sellers

Updated November 2026 · 2026 tax year · 9 minute read

Driving for a rideshare app, delivering food, doing freelance projects, or selling products online all count as self-employment in the eyes of the IRS, even if you only do it a few hours a week. That means no withholding, self-employment tax on top of income tax, and responsibility for paying throughout the year. This guide explains how it works and where gig workers most often lose money or make mistakes.

The basics: you are in business for yourself

When you earn through a platform as an independent contractor, the platform does not withhold income tax, Social Security or Medicare tax from your payments. You report your income and expenses on Schedule C, and you pay self-employment tax of 15.3% on 92.35% of your net profit, plus regular income tax. Our guide to self-employment tax has the details. There is no minimum amount for this: you owe self-employment tax if you have net earnings of $400 or more for the year, and all income is taxable no matter how small, as explained in our 1099 guide.

Tax forms you may receive

Gig platforms report your earnings in different ways depending on how they pay you. Many send a 1099-NEC for payments for services. Others send a 1099-K, which reports payments received through a card or payment network. Some platforms send a year-end summary instead of a form, or nothing at all if you fall below a threshold. In every case, the platform's summary is just a starting point. Your own records of earnings, tips and expenses are what matter, and they should be compared to the platform's totals.

Rideshare and delivery drivers

For drivers, the vehicle is the biggest deduction. These can be claimed:

• Mileage. The 2026 standard rate is 72.5 cents per mile for miles driven through June 30 and 76 cents per mile for miles driven from July 1. Miles when you have a passenger or an order count, and so do miles you drive to reach a pickup after accepting a ride or order. Miles to and from home, and personal driving, do not. Many drivers also consider miles driven while waiting for a request. Whether those count depends on the facts, so check IRS guidance or ask a tax professional. See the mileage deduction guide.
• Parking, tolls and fees. These are deducted in addition to the mileage rate.
• Phone and data plan. The business-use portion.
• Supplies. Insulated bags, phone mounts, dash cams, water and snacks for passengers, and cleaning supplies.
• Platform fees and commissions. If your 1099 shows gross payments before fees, you may be able to deduct the platform's service fees as an expense. If it reports net, do not deduct them twice.
• Business insurance and permits. The part of vehicle insurance or licenses specific to the business.

Choose one method for the vehicle and stick to it for the year. If you use the standard mileage rate, do not also deduct gas, repairs, or depreciation. If you use actual expenses, track every receipt.

Tips are income

Tips you receive through the app or in cash are income. Platforms often show tips in your earnings summary, but cash tips will not appear on any form, and you are still responsible for reporting them. Starting with the 2025 tax year, a new federal deduction for qualified tips may reduce your income tax if you work in an occupation that customarily receives tips. It was created by legislation passed in 2025 and runs through the 2028 tax year. It has income limits and conditions, and as a self-employed person you have to meet the rules for your trade or business. It reduces income tax but not self-employment tax. Check the IRS guidance for the current list of eligible occupations before assuming it applies to you.

Freelancers and creators

Freelance writers, designers, programmers, tutors, coaches and content creators get paid by clients, platforms or sponsors. The tax rules are the same, with a few practical points:

• Invoices are your records. Keep a copy of each invoice and when it was paid. A client who does not send a 1099 still owes you the payment, and you still owe tax on it.
• Non-cash payments count. If a client pays you in goods or services instead of money, or a brand sends you products as payment for a promotion, the fair market value is generally income.
• Home office and equipment. A computer, camera, software and a dedicated workspace may be deductible. See our home office guide.
• Foreign clients. Income from outside the US is still taxable, and currency conversions should be documented.

Online sellers

People who sell products through Etsy, eBay, Amazon, Shopify and similar sites often confuse two cases.

• Running a business. If you sell regularly to make a profit, whether handmade items or items you buy to resell, you report sales on Schedule C. You subtract the cost of the goods you sold, shipping, packaging, platform fees and advertising. Track your inventory and what you paid for it.
• Selling personal items. If you sell used belongings for less than you paid for them, that is generally not taxable income, and the loss is not deductible. If you sell something for more than you paid, the gain is generally taxable. A 1099-K that reports this kind of sale should be reviewed carefully so you do not pay tax on money that was not a gain.

Sales tax is a separate issue. In most states, large marketplaces collect and remit sales tax on your behalf, but if you sell through your own website or at in-person events, you may need to register and collect it. Check your state's rules.

Paying as you go

Because nobody withholds tax from your platform income, you either need to make quarterly estimated payments or increase the withholding on your day job's paychecks. If you expect to owe $1,000 or more, the IRS expects regular payments, and our guide to quarterly estimated taxes lists the 2026 dates. A good rule of thumb is to move a fixed percentage of every payout into a separate savings account right when it arrives. Our set-aside guide and the free calculator help you choose that percentage.

An example

Chris works a full-time job and drives for a delivery app on weekends. In 2026 the app pays $11,200, including $1,400 in tips, and Chris receives $300 in cash tips. Chris drove 3,000 miles for deliveries from January through June and another 3,000 from July through December, including the trips to restaurants, and paid $240 in parking and tolls and $180 for a phone mount, thermal bags and similar gear. Chris also pays about $400 of the phone bill for business use.

Chris would owe self-employment tax on $6,225 × 92.35% × 15.3%, or about $880, plus income tax at Chris's own bracket. Without the mileage deduction, the profit would have been $10,680 and the tax would have been much higher. The log of miles is worth a lot.

Common gig-worker mistakes

• Ignoring income that has no form.
• Skipping mileage because tracking is annoying.
• Deducting platform fees that were already netted out.
• Not saving for taxes and getting hit with a bill in April.
• Mixing personal and business money in one account.
• Forgetting state taxes and local license requirements.

The recordkeeping guide shows a simple setup that works for most gig workers.

Run the numbers with the free calculator

This guide is general information, not tax advice. Tax rules change and individual circumstances differ. Confirm the details for your situation with the IRS or a licensed tax professional.