Why gig workers owe more than they expect
When you work for an employer, they take income tax out of every check and pay half of your Social Security and Medicare.
When you work for an employer, they take income tax out of every check and pay half of your Social Security and Medicare. When you work for yourself, nobody withholds anything, and you pay both halves of Social Security and Medicare. That's the 15.3% self-employment tax, charged on 92.35% of your profit.
On top of that, your side profit is added to any other income you have, so it's taxed at your highest bracket. That's why a $10,000 side gig can mean a few thousand dollars in tax.
Profit, not pay, is what's taxed
You only pay tax on what's left after business costs. For driving gigs, the simplest deduction is the IRS standard mileage rate: 72.5 cents for every business mile in 2026. Keep a mileage log or use an app that tracks it. You can't also deduct gas and repairs if you use the mileage rate.
The quarterly deadlines
If you expect to owe $1,000 or more for the year, the IRS expects you to pay during the year using estimated tax payments. You can pay online at IRS Direct Pay with no fee. Paying at least 100% of last year's total tax in four even payments (110% if your income was over $150,000) protects you from the underpayment penalty, even if you end up owing more.
Tips
For 2025 through 2028, people in jobs that customarily receive tips may be able to deduct up to $25,000 of qualified tips from federal income tax. Social Security and Medicare are still owed on tips, and not every gig qualifies, so this calculator doesn't subtract them automatically. Ask your tax preparer or check the IRS guidance.
Sources
5 sources
Last checked October 2026. Amounts change every year.
- IRS · 2026 standard mileage rate, 72.5 cents
- IRS · Self-employment tax
- IRS · Estimated taxes and due dates
- Social Security Administration · 2026 wage base, $184,500
- IRS · 2026 tax brackets and standard deduction