If you drive for a rideshare app, deliver food, or freelance on the side, there's a good chance you owe more to the IRS this year than you expected.
And a big chunk of that pain traces back to one number: the self-employment tax.
Employees split their payroll taxes with their boss.
You cover both halves of Social Security and Medicare yourself, which adds up to 15.3% on top of regular income tax.
That's before you subtract a single dollar for gas, phone bills, or the miles you put on your car.
The good news is that most gig workers overpay simply because they don't claim what they're allowed to.
The standard mileage rate for 2024 sits at 67 cents per mile, and for many drivers that single deduction wipes out a huge share of their taxable income.
You can deduct mileage or actual car expenses like repairs and insurance, but not both.
Pick the method that saves you more, and keep a log, because the IRS wants documentation, not a rough guess.
Nobody withholds taxes from your gig paycheck, so if you don't send estimated payments in April, June, September, and January, you can get hit with an underpayment penalty on top of your regular bill.
Set aside roughly 25% to 30% of every payout in a separate account.
It stings in the moment, but it beats a surprise bill in April that you can't cover.
Don't sleep on the retirement angle either.
A SEP IRA or solo 401(k) lets self-employed workers stash away far more than a typical workplace plan, and every dollar contributed lowers your taxable income now.
One more thing worth checking: the Qualified Business Income deduction.
Many gig workers can knock 20% off their qualified business income, but plenty never claim it because they assume it's only for big operations.
If your gig income is modest, free filing options through IRS Free File or reputable software can handle the self-employment forms without charging you an arm and a leg.
The bottom line is that gig taxes reward the organized and punish the careless.
You don't need an accountant on retainer, but you do need a system, a mileage log, and a habit of saving as you earn.
Final Thoughts
A few hours of tracking now can easily save you hundreds, if not thousands, when the next filing deadline rolls around.