The face of work has changed.
Its no longer a given that someone will choose to work for an employer.
But like everyone else, gig workers have to pay taxes on their income.
For 2024, youll pay 15.3% in self-employment taxon up to$168,600 in income for the year.
That money goes toward Social Security and Medicare.
Here are some things you might start doing this very minute to set yourself up for success.
No Interest Til Almost 2027?
Even if you dont receive a form, though, youre ultimately responsible for reporting all income.
Below that is Part 2, which asks for your expenses.
Those are divided into categories like advertising, car and truck expenses and travel and meals.
Youll need to maintain documentation for every deduction you take.
Keep any receipts, account statements or invoices to present if youre ever audited.
Otherwise, maintain a log of your weekly activities and check that itsIRS compliant.
If you wait until tax time, youll likely find that you owe penalties.
To reduce that risk, the IRS recommends you pay taxes as you earn the money.
This is known asestimated payments.
These payments are due roughly every three months, Rocky Mengle, senior tax editor atWealthUp, said.
And if you dont pay enough each quarter, the IRS can hit you with an extra penalty.
UseIRS Form 1040-ESand the related instructions to calculate the proper estimated tax payment amount.
Vehicle Use
Many gig workers use a personal vehicle to do the job.
The IRS allows you todeduct that cost, either through claiming the mileage or calculating the actual expenses.
To qualify to deduct business use of your vehicle, youll need documentation.
Using amileage tracking appcan help you stay compliant.
Technology
You probably use a cell phone and/or laptop for your gig work.
All of that is deductible, from the equipment purchase to your internet and phone service.
For pricier equipment, you may be better offdepreciating itand taking the deduction over multiple years.
You may also qualify for alittle extra depreciation, but thats soon going away.
In 2022, it was 100%, and in 2023, 80%.
You candesignate an areafor planning your week, gathering data for tax purposes, or searching for gigs.
To qualify, though, the area has to be used regularly and exclusively for your business.
Medical Expenses
Unlike W-2 employment, gig work doesnt come with health benefits.
you’re free to claim those medical costs on your taxes.
Gig work comes with plenty of freedom, but taxes can be…taxing.
Stephanie Faris is a professional finance writer with more than a decade of experience.
(Can you sense my millennial sarcasm there?)
You know which ones were talking about: rent, utilities, cell phone bill, insurance, groceries…
