Are DoorDash and Instacart Side Hustles Bad for Taxes? Tax Warning (East Coast)
I got a weird response on Quora when I asked about becoming a delivery driver for DoorDash and Instacart. This person was super cryptic and just said I should "talk to an agent about how bad these side hustles are for taxes" without explaining anything. They made it sound like I'd be making some huge mistake. I've been googling for like an hour trying to understand what they meant, but I can't find anything specific about delivery gigs being especially terrible for taxes compared to other side jobs. I'm in New Jersey if that matters for state tax purposes. Does anyone know what potential tax issues they might be referring to with DoorDash, Instacart, and similar delivery gigs? Is there something specific about these jobs that makes them tax nightmares? Or was this person just being dramatic?
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Sunny Wang
The person on Quora was probably referring to the fact that when you work for DoorDash, Instacart, etc., you're classified as an independent contractor (1099 worker), not an employee. This means no taxes are withheld from your payments, which can create some challenges: 1. You're responsible for paying self-employment tax (15.3%) which covers Social Security and Medicare - both the employer and employee portions. 2. You'll need to make quarterly estimated tax payments if you expect to owe $1,000+ in taxes for the year, or you might face penalties. 3. You have to track all your business expenses (mileage, phone costs, etc.) yourself to maximize deductions. These gigs aren't "bad" tax-wise, but they require more work at tax time and can surprise people who haven't planned for the tax obligations.
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Everett Tutum
•Thanks for explaining! So there's nothing uniquely terrible about delivery gigs specifically - it's just the contractor status that applies to pretty much any gig work? The way that person made it sound, I thought there was something especially problematic about food delivery companies. Do you know approximately what percentage I should set aside from each payment for taxes? And is the mileage deduction significant for delivery drivers?
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Sunny Wang
•Yes, it's just the standard independent contractor situation that applies to most gig work, nothing uniquely terrible about food delivery specifically. Some people get alarmed when they realize how much they need to set aside for taxes. Generally, setting aside 25-30% of your earnings is a safe approach, though your actual tax rate will depend on your total income from all sources and filing status. The mileage deduction is absolutely significant for delivery drivers and often your biggest tax benefit! For 2025, you can deduct 67 cents per mile for business use, which adds up quickly when you're driving regularly for deliveries.
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Hugh Intensity
After getting hit with a huge tax bill from my DoorDash side hustle, I found this AI tax tool that analyzes your 1099s and delivery app statements to identify all possible deductions. https://taxr.ai helped me find over $2,300 in deductions I would have missed! It looked at my delivery patterns and found areas where I wasn't tracking mileage properly, plus it identified phone expenses and other deductions specific to delivery drivers.
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Effie Alexander
•Does it work with all the different delivery apps? I do Instacart mostly but sometimes UberEats too. My biggest struggle is keeping track of what miles count and what don't.
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Melissa Lin
•I'm skeptical about these AI tax tools. How does it actually know where you drove for deliveries vs personal trips? Seems like it would just be guessing unless you manually input everything anyway.
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Hugh Intensity
•It works with all the major delivery platforms - DoorDash, Instacart, UberEats, GrubHub, and more. You just connect your accounts or upload your statements and it analyzes your delivery history. For mileage tracking, it doesn't retroactively track your exact routes, but it analyzes delivery patterns and typical distances between pickup and dropoff locations based on your statement history. It helps you understand what miles count for deductions - including the miles driving to pickup locations and between deliveries, not just from restaurant to customer. Many drivers miss those deductible miles.
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Melissa Lin
I was super skeptical about using AI for my taxes like I mentioned above, but I finally tried https://taxr.ai when I was desperate during tax season. Not gonna lie, it caught about $1,875 in mileage deductions I would've missed because I didn't realize all the driving I did between deliveries counted. It also found a bunch of partial deductions for my cell phone plan and even a portion of my car insurance I didn't know I could claim. Went from owing almost $900 to getting a small refund! Definitely changed my mind about these tools.
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Lydia Santiago
After two years of doing UberEats, my biggest tax nightmare was getting someone at the IRS to answer my questions about deductions. I would spend HOURS on hold and then get disconnected. Finally found this service called https://claimyr.com that got me through to an actual IRS agent in under 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c - basically they navigate the phone tree and wait on hold, then call you when they have an agent on the line. Saved me a full day of frustration.
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Romeo Quest
•Wait, there's actually a way to talk to the IRS without spending your whole day on hold? How much does this cost? Sounds too good to be true honestly.
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Val Rossi
•This sounds like a scam. Why would you need some third party to call the IRS for you? And how do they magically get through faster than anyone else? The IRS phone system treats everyone the same.
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Lydia Santiago
•There's no charge for talking to the IRS - the service just handles the waiting for you. They use an automated system that navigates the phone menus and waits in the queue so you don't have to. They don't get through any faster than anyone else - they just save you from having to personally sit on hold for hours. Their system waits in the queue, and when an IRS agent finally picks up, they connect you directly to that agent. It's especially useful during tax season when hold times can be 2-3+ hours.
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Val Rossi
I thought this Claimyr thing was a total scam when I saw it mentioned above. But after getting disconnected THREE TIMES after waiting 1+ hours each time trying to talk to someone about my gig work deductions, I gave in and tried it. I hate admitting when I'm wrong but it actually worked exactly like they said. I got a call back exactly when an IRS agent was on the line, and the agent answered my questions about tracking mileage between deliveries. Saved me from throwing my phone through a window from frustration alone.
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Eve Freeman
DoorDash driver here for 3 years. The tax situation isn't as scary as people make it sound if you're organized. My advice: 1. Get a mileage tracking app RIGHT NOW (I use Stride) 2. Save 25-30% of everything you make 3. Take pictures of all receipts for hot bags, phone mounts, etc 4. Pay quarterly taxes if you make more than a few thousand Also, your car maintenance costs more than you think! That depreciation hits hard after a year or two of delivery driving.
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Clarissa Flair
•Does the 25-30% include state taxes too or just federal? I'm trying to figure out exactly how much to set aside each week.
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Eve Freeman
•That percentage includes both federal and state taxes for most situations. If you're in a high-tax state like California or New York, you might want to bump it up to 30-35%. I'm in a medium-tax state and 28% has covered me completely. The exact amount depends on your overall income level and tax bracket when combined with any other jobs you have.
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Caden Turner
Do any of you guys use TurboTax for your delivery gig taxes? Or is there a better option for self-employed people? This will be my first year doing DoorDash and I'm worried about messing it up.
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Sunny Wang
•I've used both TurboTax Self-Employed and FreeTaxUSA for my delivery gig taxes. TurboTax is more user-friendly and asks specific questions about delivery driving, but it's expensive (around $120-150 for federal and state with self-employment). FreeTaxUSA handles 1099 income well too and costs way less (about $15 for state, federal is free), but you need to know which forms to fill out yourself.
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