Tax Guide: Self-Employment & Deductions

1. Understanding Self-Employment Tax

As a gig driver (independent contractor), you are responsible for paying self-employment taxes (currently 15.3% in the U.S.) to cover Social Security and Medicare. Unlike regular W-2 employees, no tax is withheld from your payouts automatically.

Use the self-employment tax toggle in WillDrivingPay to estimate this cost so you can set aside cash weekly before paying yourself.

2. Standard Mileage vs. Actual Expenses

When filing taxes, you can deduct the cost of operating your vehicle using one of two methods:

• Standard Mileage Rate — Deduct a flat rate per business mile driven (e.g., 67.5 cents/mile in 2024). This is simple, requires only a mileage log, and is usually the highest deduction for fuel-efficient cars.
• Actual Expenses — Deduct the real costs of gas, oil changes, repairs, tires, insurance, registration, and vehicle depreciation. This requires saving every receipt and calculating the business-use percentage of your vehicle.

Our calculator shows you the IRS rate deduction side-by-side with your enabled actual expenses so you can evaluate both methods.

3. Write-Offs Beyond the Vehicle

In addition to driving costs, you can deduct other expenses that are ordinary and necessary for your business:

• Phone Plan — A percentage of your monthly cell phone bill matching your business usage.
• Passenger Amenities — Chargers, water bottles, and masks provided to passengers.
• Road Tools & Tolls — Dashcams, mounts, tolls, and parking fees paid while working.
• Software & Fees — Subscriptions to mileage tracking apps, music services for passengers, and platform fees.

4. Best Practices for Gig Tax Planning

• Track every mile. Log miles from the moment you turn on the app looking for orders until you turn it off. Commute miles to your first start and home from the last drop-off are often deductible if you keep the app active.
• Save receipts. Use scanner apps to digitally save every gas, maintenance, and phone bill receipt.
• Pay quarterly estimates. If you expect to owe more than $1,000 in taxes, pay quarterly estimated taxes to avoid underpayment penalties.