Tax Tips for Gig Workers
Whether you drive for a rideshare service, deliver food, sell goods online, rent out your home, or provide freelance services, you’re part of the growing gig economy. While this flexible, self-directed work has many benefits, it also comes with specific tax obligations.
This guide highlights the key tax rules gig workers should understand to stay compliant with IRS requirements and potentially reduce their tax liability.
All Gig Income Is Taxable
The IRS requires all income from gig work to be reported, even if you do not receive a tax form. This includes payments received via:
- Cash or checks
- Digital payment apps (Venmo, PayPal, Cash App, etc.)
- Online platforms (Etsy, Airbnb, rideshare apps)
- Virtual currency
- Barter or trade transactions
Whether gig work is a side hustle or your primary source of income, it is considered taxable income.
Tip Deduction Beginning in 2025
Starting with your 2025 tax return, eligible gig workers may deduct up to $25,000 of reported tips. This includes cash and card tips received directly from customers or through tip-sharing arrangements. The deduction phases out if income exceeds $150,000 ($300,000 for married filing jointly).
Changes to Form 1099-K Reporting
If you use third-party payment processors such as PayPal, Square, Etsy, or Airbnb, you may receive Form 1099-K.
For 2025, a Form 1099-K is issued only if:
- Total payments exceed $20,000, and
- The number of transactions exceeds 200 during the year
Even if you do not receive a Form 1099-K, you are still required to report all income. The IRS uses additional data-matching tools to track earnings, so accuracy is essential.
Other Tax Forms You May Receive
- Form 1099-NEC – Nonemployee compensation
- Form 1099-MISC – Other miscellaneous income
These forms report income paid to you by businesses or platforms. Even if you do not receive one, you must still report all income earned.
Looking ahead: For the 2026 tax year, the reporting threshold for most payments increases from $600 to $2,000.
Quarterly Estimated Taxes
Because taxes are generally not withheld from gig income, most gig workers must make quarterly estimated tax payments made to the IRS to cover:
- Federal income tax
- Self-employment tax, which includes:
- Social Security tax (12.4%)
- Medicare tax (2.9%)
- Additional Medicare tax, if applicable
These payments apply to individuals who expect to owe $1,000 or more in federal tax for the year after subtracting withholding and refundable credits.
How Estimated Taxes Are Calculated
Estimated tax payments are based on your projected annual net income, not gross receipts. This requires:
- Estimating total gig income for the year
- Subtracting ordinary and necessary business expenses
- Calculating:
- Income tax based on your marginal tax rate
- Self-employment tax using Schedule SE
Estimated tax due dates
- April 15
- June 15
- September 15
- January 15 (following year)
Safe Harbor Rules to Avoid Penalties
The IRS provides safe harbor provisions to help taxpayers avoid underpayment penalties. You generally will not owe a penalty if you pay at least:
- 90% of your current year tax liability, or
- 100% of your prior year tax liability
(110% if your adjusted gross income exceeded $150,000)
Safe harbor payments must be made on time and in equal installments unless income is earned unevenly throughout the year. Use Form 1040-ES to calculate your payments. A common rule of thumb is to set aside 20%–30% of earnings, though the actual amount depends on income and deductions.
Pro tip: If you also have a W-2 job, increasing your payroll withholding can help offset self-employment tax.
Deductions Can Lower Your Tax Bill
As a gig worker, you are treated as a self-employed business owner. You may deduct expenses that are ordinary and necessary for your work, including:
- Mileage or vehicle expenses
- Supplies and tools
- Internet and phone expenses (business portion)
- Advertising and website costs
- Software and app subscriptions
Maintaining detailed records and receipts is critical—both to support deductions and in case of an IRS audit.
Selling Personal Items Online
If you sell used personal items (such as clothing, electronics, or furniture) through online marketplaces, tax treatment depends on whether you made a profit:
- Sold at a loss: No tax is owed. If you receive a Form 1099-K, the income must be reported and offset to show no taxable gain.
- Sold at a profit: The gain must be reported as capital gain income.
Be prepared to provide purchase price information so gains or losses can be calculated correctly.
Stay Organized Year-Round
To avoid surprises and reduce stress at tax time:
- Track income and expenses using spreadsheets, apps, or accounting software
- Keep receipts, bank statements, and digital records
- Review IRS guidance at the Gig Economy Tax Center:
https://www.irs.gov/businesses/gig-economy-tax-center
Good recordkeeping saves time, money, and headaches.
Frequently Asked Questions (FAQs)
Do I have to report gig income if I didn’t receive a Form 1099?
Yes. All gig income is taxable and must be reported, even without Form 1099-K, 1099-NEC, or 1099-MISC.
I received a Form 1099-K for selling personal items. Do I owe tax?
It depends. Sales at a loss are generally not taxable; sales at a profit must be reported.
Do gig workers need to pay estimated taxes?
Most do, because taxes are not withheld from gig income. Estimated payments cover income and self-employment taxes.
How should I track my income and expenses?
Use accounting software, spreadsheets, or mobile apps, and keep all supporting documentation.
Need Help?
Gig economy taxes can be complex, especially with changing reporting rules and deductions. If you’re unsure how to report income, estimate taxes, or maximize deductions, contact our office for guidance. We’re here to help you stay compliant and minimize your tax liability.