Taxes are complicated enough, even when you’re working a job where you receive a nice, neat little paper at the end of the tax year that gives you all the information you need for your tax form (assuming you can figure out what it means and where it goes, that is). If you work in the gig economy and don’t have the convenience of an employer-created form, taxes get even more complicated. As you go through the year and dread tax time, here’s what you need to know.
What income is taxable?
Short answer: All of it. If you made any money through the gig economy, it’s taxable. The IRS even says the cash value of bartered items (aka, a “You cut my hair and I’ll fix your computer” type transaction) is taxable. The only exceptions are for income streams like child support payments, educational grants, and dollars put into your retirement account.
Tax deduction for vehicles
There are a number of deductions possible for members of the gig economy. The most popular is probably a mileage deduction. If you are using your vehicle for business (including to provide ridesharing and courier services), you are eligible for the business mileage deduction, which is 53.5 cents per mile. Your deduction for mileage will be on Line 44 of Schedule C on the 1040 form.
You can also claim deduction for your lease payment or the depreciation on your vehicle, your vehicle maintenance (oil changes, etc.), and your auto insurance. You can also take deductions for anything you buy to provide to your riders as a service, and for any tolls or parking you may have to pay.
Tax deduction for homes
For Airbnb leasers, you may be able to deduct part of your home, if you have a room that you use exclusively for business purposes. Otherwise, you can divide the number of days you use your home (or part of your home) for business purposes, and how many days you use it for personal use. You must also be able to prove that your home is your primary place of business. See the IRS website for more information about this deduction.
If you deduct for rental expenses, know that you cannot deduct more than you actually made through Airbnb.
Tax deduction for cell phones
Let’s face it – you couldn’t do what you do without your cell phone. From checking for work to communicating about orders to navigating through an unfamiliar location, your cell phone is crucial to your business, and that means it’s tax deductible. Obviously not all of your cell phone use is for business purposes, but you can deduct the amount of it that is.
For this deduction, look for the Schedule C on your 1040 form, Line 22.
Likewise, the purchase of a new cellphone or cellphone accessories used for business are deductible (so save your receipts). If you subscribe to a music service that you use for your business, that subscription is deductible as well. However, as with other cell phone costs, only the percentage actually for your business is deductible.
Other possible deductions can include health insurance, some meals, roadside assistance, car washes or cleanings and even a dashcam. Many apps aim to help track expenses (see our article for details).
For a complete guide to filing your taxes as an independent courier, see our full breakdown of the process.