Taxes are tricky enough. Calculating your taxes from Doordash and other gig work earnings can really make your head spin.
It's hard enough that you're on your own, with no one withholding earnings from your Doordash earnings like what happens with a W2 job. To top it all off, there is no easy answer to the “how much will I owe?” question. Everyone's situation is different.
Of course, you could ask that question on Facebook and Reddit. Brace yourself for some terrible answers.
It's true. Taxes are tricky, to put it mildly. It's impossible for any one article to help you know exactly what to expect. This is why we have an entire series of articles onhow do Doordash taxes work for Dashers. We have a list of all the articles in the Doordash taxes series here.
In this part of the series, we'll help you calculate the tax impact from your Doordash earnings. Understand that this is not about your total income tax bill, or figuring out if you'll have to pay in or get a refund. However, if you make a profit on your deliveries, one of two things will happen: you will either pay more in taxes, OR you will get a smaller refund.
We'll walk through the things to consider and then provide an actual calculator where you can plug in your numbers. We'll talk about:
- How to calculate your Doordash tax impact
- Why do we keep talking about tax impact?
- The Doordash tax impact calculator
- Additional Doordash tax resources
The first parts of this article explain why we calculate things the way we do. If you wish, you can jump immediately to the tax calculator section:
About this article
This is NOT about figuring out your entire income tax bill. There are too many moving pieces in your tax picture for a simple calculator to do that. The idea here is to help you estimate how much your Doordash income impacts your overall tax return.
This is not tax advice and should not be taken as such. The purpose is to educate and help you understand how taxes work. You should seek a tax professional if you need direct advice related to your situation.
If you want advice, it's this: Get a tax professional. It's too easy to miss the things that can make a huge difference for you. Good tax professionals understand how it works for self-employed people and 1099 contract workers. You'll find it's worth the extra money.
Finally, this article focuses on taxes for Dashers in the United States. We do not attempt to cover laws in other countries or for local or state income taxes. Get help from your tax professional for state and local taxes in your area.
How to calculate your Doordash tax impact
We'll talk about the basic steps you can take to identify the tax impact from your Doordash (and other gig economy) earnings.
Remember, this isn't about your entire income tax picture. Instead, we want to determine how your earnings will impact your tax return. How much more will you pay, or how much less will your Doordash tax refund be, because of what you made with the food delivery service and other gigs like Uber Eats, Instacart, etc.?
There are six steps we recommend:
- Understand three important facts about Doordash taxes
- Estimate your business profit
- Calculate self-employment tax
- Determine your income tax bracket
- Calculate your income tax impact.
- Add your self-employment tax to the income tax impact to get the total tax impact.
Step 1. Understand three important facts about Doordash taxes
These three facts will help you tremendously in understanding how your self-employment income impacts your tax bill. We get into more detail about the big picture of how Doordash taxes work.
1. Your tax impact is based on your profits, not total earnings from delivery fees, service fees, incentives, tips, etc.
Technically, we are small business owners.Dashers are self-employed, meaning you provide delivery services as a business and not as Doordash employees.
Your taxable income as a business owner is your profit, or what's left over after expenses. That means it's not based on the net pay and tips you receive. You can claim your Dashing milesand other non-carDoordash tax write-offsregardless ofwhether you itemize deductions.
2. There are actually two different Federal taxes you must pay.
It's not just income tax.Dashers must also pay self-employment tax. Self-Employment tax is our version of Doordash Social Security and Medicare taxes. The self-employment tax rate is 15.3%
Self-employment tax works differently than income tax. Just like an employee's FICA, it's charged against every dollar you earn, regardless of tax deductions, filing status, dependents, etc. And employee has those taxes withheld from their check, but since there's no withholding with Doordash, you have to file them with your income tax return.
While self-employment tax is charged only against your self-employment earnings, income tax is based on the bigger picture of your overall income. You factor in additional income, tax deductions, tax brackets, etc.
3. These things impact your tax bill – the part BEFORE payments and credits are applied.
If I'm repeating myself from earlier, it's worth doing so. The thing is, your other factors are what they are, regardless of your Doordash income, expenses, and profit. That's why we can't adequately cover your entire income tax situation.
What we CAN do is get a feel for how much more your taxes will be (or how much less you'll get as a refund) based on your business profits.
Step 2: Estimating business profit
It's as simple as subtracting expenses from your earnings. Generally, your expenses will be made up of your miles driven and purchases you made for your business. For tax calculation purposes, like trying todetermine how much to save for taxes for Doordash and others, here's how we do it with our tax calculator:
- Add all income from all gig economy sources (Doordash and other platforms) including tips.
- Subtract the standard mileage amount (65.5¢/mile for 2023 miles, or 67¢/mile in 2024).
- Optional: Subtract other expenses (hot bags, cell phone accessories, the business portion of phone bills, etc.)
Those steps give you your business profit. That, not your gross pay from Doordash, is your taxable income as an independent contractor.
At tax time, self-employed individuals all do this on IRS form Schedule C: Profit or Loss from Business. On that form, you list income, then subtract expenses and car expenses to get your taxable profit. We talk in more detail here about how Schedule C works for Dashers.
Step 3: Calculate Self-Employment Tax
This one is pretty simple: We multiply business profit by 14.13%.
The Self-Employment tax rate is actually 15.3%. However, the IRS allows you to deduct 7.65% of your profit before making that calculation, which gives us an effective rate of 14.13%. This will be your self-employment tax regardless of other income, personal tax deductions or anything else. The only exceptions are:
- You won't owe self-employment tax if the taxable profit is less than $400.
- Self-employment tax is only charged up to $160,200 in profit (2023 tax year). Income over that amount is taxed at 2.9% for Medicare.
Step 4: Determine your income tax bracket
Unlike self-employment tax, income tax rates vary depending on total income. There are several factors, including additional income, tax deductions, and adjustments. Income tax starts at 10%, then increases to 12%, 22,%, 24% and so on as your income increases.
A simple way to estimate your tax bracket is to do the following:
- Multiply your business PROFIT (step 2) by 72.35% (we'll explain more in the next step)
- Add that total to other income you (and your partner, if filing a joint return) made.
- Deduct the appropriate standard deduction (in 2023 it's $13,850 for single, $27,700 for joint returns, and $20,800 for head of household).
- See where that final number fits in the chart below.
Income tax brackets are not flat rate. You pay in steps. For example, a single person pays 10% on the first $11,000 of taxable income (2023), then 12% of the NEXT $33,725 of income, and so on.
If a single person made $90,000, which lands them in the 22% tax rate, they won't pay 22% on their entire income. Instead, they'll pay in steps, withthe last $45,275 being taxed at the full 22% rate (for 2023).
This chart shows how the tax brackets work.
Note that our calculator won't reflect those nuances. There are too many outside factors, and we wanted to make this pretty simple. We'll have you choose what bracket you think you'll be in and calculate accordingly. From a planning perspective, it's better to overestimate your taxes, so we tend to suggest assuming all your gig income will be taxed at the highest bracket.
Step 5: Calculate your income tax impact.
Multiply your business profit by 72.35%, and multiply that total by your tax bracket. For example, a person in the 10% bracket with $10,000 profit would:
- Multiply $10,000 by 72.35% to get $7,235.
- Multiply that $7,235 by 10% to get a $723.50 tax impact.
Why 72.35%? Because there are two special tax deductions a self-employed person can take:
- 20% of profits for the QBI (Qualified Business Income) deduction.
- 7.65% of profits for the self-employment tax deduction.
You can take both of these deductions even when taking the standard tax deduction. You can read more about these special tax deductions for self-employed Dashers.
Your actual results may vary dramatically because of how tax brackets and tax deductions work. While it's possible the income tax impact would be lower than what our calculator comes up with, we feel it doesn't hurt to estimate on the high side.
Step 6: Add self-employment tax impact to income tax impact to get your total tax impact.
Using these calculations, a hypothetical Dasher in the 10% bracket with $10,000 profits would have $1,413 in self-employment tax and $723.50 in income tax. Add those together to get a total of $2,136.50 tax impact.
In other words, because of their delivery income, their tax burden will be $2,136.50 higher than it would be without that income. That may mean they have to pay that much more at tax time. If they had enough payments and credits, they might instead end up with a refund that is smaller by that amount.
Why do we keep talking about tax impact?
The bottom line is your tax situation is unique. Everyone has a different situation due to variations in additional income, filing status, dependents, tax credits, withholding, etc. etc.
That is why we don't attempt to tell you what you will pay extra on tax day or if you'll get a refund. That's not what we're trying to do here. What we are trying to do is help you understand how much more you would pay in (or how much less you will get back as a refund) due to your gig work.
If you would normally pay $500 on tax day based on your other income, but now you have to pay $2,500 after accounting for your Doordash income, your tax impact is $2,000. If you normally would have a $3,000 tax refund, a tax impact of $2,000 means you now only get $1,000 back.
The Doordash tax calculator
Use this calculator to help understand the tax impact of your gig work.
Remember, this is not a guaranteed number. This is an estimate to help you prepare for taxes. It starts with the accuracy of the information you provide. If your income, miles and other expenses are accurate, your self-employment tax total should be pretty close. However, the income tax total can vary widely in accuracy. This is due to the many factors involved with income taxes, but in particular because income tax is never a flat percentage of your income in the same way that self-employment tax is.
Finally, remember that this is about tax impact. In other words, it's to help you estimate how much more your taxes will be (or how much less your refund will be) because of your gig work. It is NOT intended to calculate your total tax picture, and does not factor in state or local taxes.
Filling in the calculator
This should be pretty self-explanatory but we'll provide a few notes about filling it in:
Tax year
Were your earnings in 2023 or 2024? We use this to calculate the mileage allowance, which changes from year to year.
Total Payments Received.
If you worked several gigs, you can add all total payments. Tips are taxable income, and tips paid through the app will be included in your 1099 form from Doordash and others.
Total Business Miles Driven.
The mileage deduction can be significant for Dashers and is often by far the largest business expense. We'll use this to calculate what you might claim for driving expense. This calculator assumes using the mileage deduction rather than the actual expense method, as it's usually the better option. You can learn more about what miles you can claim for Doordash and other gigs, and also about how the Doordash Car deduction works. If you don't drive for your deliveries, leave this at 0.
Additional Business Expenses
If you have many other deductible expenses for your gig work, you can add those up and enter the total here. I typically don't bother with this step, as it's usually pretty insignificant for me when compared to my miles. You can learn more about the business expenses you can claim with Doordash.
What Income Tax Bracket You Expect to Be In
Earlier in the article we posted a chart of the tax brackets. We also talked a bit more about how the tax brackets work. We will assume a minimum of 10%.
About the Results
- Gross income. This is the amount you entered as income.
- Standard mileage allowance: Miles driven multiplied by the mileage rate for the year you selected.
- Total business deductions: Mileage allowance added to your other business expenses.
- Total Profit: The amount left over after deducting expenses from gross earnings. Profit is the taxable portion of your gig work income.
- Self-employment tax: This is calculated at 14.13% of your total profit
- Income tax: This is calculated as 72.35% of profit, multiplied against your tax bracket.
- Total tax impact: This is your income tax and self-employment tax added up.
Additional Resources for Doordash (and other gig app) Taxes
You can always start direct from the horse's mouth. The IRS has a great resource, providing tax information for sole proprietors in their Gig Economy Tax Center. You can also check out our series of artiles on how Doordash taxes work.
