Welcome to the gig economy, where your car is your office, your phone is your time clock, and your coffee is your fuel. If you’re new to the game, congratulations on stepping into a world of freedom, flexibility—and, yes, hidden expenses. While gig work can be incredibly rewarding, it’s important to understand the true cost of doing business as a 1099 contractor. Let’s break it down so you can protect your profits (and avoid tax season tears).
Uncle Sam Wants You… to Pay Taxes
Here’s a not-so-fun fact: as a gig worker, you’re considered a 1099 independent contractor, not an employee. This means DoorDash, Uber, or Grubhub isn’t withholding taxes for you—that’s your job now.
Here’s the deal:
- You’re on the hook for self-employment tax, which covers Social Security and Medicare. That’s a whopping 15.3% of your earnings before deductions.
- On top of that, you may owe federal income tax and, depending on where you live, state income tax too.
To avoid a nasty surprise in April, start setting aside 20-30% of your earnings for taxes. And if you’re earning consistently, you’ll need to pay quarterly estimated taxes. (Pro tip: Missing quarterly payments can result in penalties. Uncle Sam is not forgiving.)
Quick Tax Humor: Taxes are like a clingy ex—you might try to ignore them, but they’ll find you, and it’ll cost you way more than if you’d just dealt with them upfront.”
Your Car: The Real MVP (Most Valuable Payment-Eater)
If your car could talk, it’d probably say, “Hey, this gig work thing is cool, but I’m doing all the heavy lifting here!” Your vehicle is essential, but it’s also a major expense you need to account for.
1. Gas: The Never-Ending Expense
Fuel is the most obvious cost. With gas prices fluctuating like your tips, you need to be strategic:
- Use apps like GasBuddy to find the cheapest gas near you.
- Plan your routes efficiently. Combining deliveries or working in areas with high demand can help reduce mileage and save on gas.
Tip: Don’t just think about cost per gallon. Your time spent at the pump is valuable, too. Get in, fill up, and get back on the road!
Gas prices are like reality TV drama—always unpredictable and guaranteed to make you question your life choices.
2. Maintenance: Keep That Car Happy
Every mile you drive takes a toll on your car. Regular maintenance isn’t just smart—it’s non-negotiable.
- Oil changes: Every 3,000–5,000 miles. Think of it as your car’s morning coffee.
- Tire replacements: Expect to replace them every 25,000–50,000 miles, depending on the tire type.
- Brakes: With all the stop-and-go traffic, you might need new brake pads more often than the average driver.
These costs can sneak up on you. Budget for maintenance and shop around for deals at trusted mechanics. A well-maintained car lasts longer and costs less in the long run.
Skipping maintenance on your car is like skipping the dentist—sure, it’s cheaper now, but you’ll pay for it with pain and regret later.
3. Depreciation: The Silent Wallet Killer
Every mile you drive decreases the value of your car. If you’re putting 1,000+ miles on your car every week, that depreciation adds up fast. This is especially important if you plan to sell or trade in your car later.
Depreciation is like aging—inevitable, relentless, and always worse when you look back on it.
4. Repairs: The Oh-No Fund
Flat tire? Transmission issues? Something rattling under the hood? Repairs can hit when you least expect them. Set up an “Oh-No” fund for car repairs—aim for at least $1,000 in savings. It’s better to be prepared than stranded.
Good News: Write It Off!
Here’s where taxes and car expenses intersect in a beautiful way: deductions. As a gig worker, you can deduct the business use of your car from your taxable income. This reduces how much you owe Uncle Sam.
You have two options for vehicle-related deductions:
- Standard Mileage Deduction:
- For 2024, the IRS mileage rate is 65.5 cents per mile (check the latest rate each year).
- Keep a log of your business miles using apps like Stride or MileIQ.
- Actual Expense Method:
- Deduct the actual costs of gas, oil changes, maintenance, repairs, insurance, and depreciation.
- This works well if you drive an older, less fuel-efficient car.
Pro Tip: Most drivers find the standard mileage deduction simpler and more profitable. Test both methods and stick with what works best for your situation.
Don’t Forget About the Little Things
While your car is the star of the expense show, there are other costs to consider:
- Your Phone: This is your lifeline for gig work. Keep it charged, updated, and covered by insurance.
- Health Insurance: Gig work doesn’t come with benefits. Explore affordable options through marketplaces like GigWorkersUnite.org.
- Snacks and Drinks: Staying fueled (with food, not gas) is key to a successful shift. Pack snacks instead of buying them on the road—it’s cheaper and healthier.
How to Protect Your Profits
- Track Every Expense: Use a simple app or spreadsheet to log your costs. Keeping detailed records makes tax time easier and ensures you don’t miss deductions.
- Save for Taxes Weekly: Open a separate savings account and deposit 20-30% of your earnings into it. Treat this as untouchable.
- Schedule Maintenance: Proactive care for your car saves money in the long run. Skipping an oil change now could lead to a costly engine repair later.
- Use Discounts: Explore partnerships through GigWorkersUnite.org for deals on vehicle maintenance, insurance, and tools to simplify your work.
A Final Word of Encouragement
Being a gig worker isn’t just a job—it’s a hustle, a lifestyle, and a way to take control of your time. Yes, there are hidden costs, but with smart planning, you can stay ahead of the game. Save for taxes, take care of your car, and budget for the unexpected. Remember, every mile you drive is a step toward your goals, whether it’s paying off debt, saving for a dream vacation, or just making ends meet.
So keep hustling, keep learning, and keep your finances (and your car) in tip-top shape. The road ahead is yours to conquer.