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How Much Should I Save for Taxes As a Contractor for Grubhub Doordash Uber Eats Instacart and other delivery gigs?

As a delivery contractor with Grubhub, Postmates, Uber Eats, Doordash, Instacart or even these days with Lyft, one of the rudest awakenings we can get is to know we have to do something about taxes.

Taxes????? Rutro.

How much SHOULD you save for taxes as an independent contractor? There are so many factors in what you pay that it's not practical to give you a fixed amount.

What I can do is give you five steps to help you save and stay out of tax trouble.

The Delivery Driver's Tax Information Series: The information contained in this information series is for educational and informational purposes only. This information is not intended to be and should not be considered to be legal, tax, or any other professional advice. Information is provided as a best effort to research useful information on this topic but makes no representations as to the accuracy or completeness of information provided. Suggestions and ideas presented are based on my experiences and opinions. You should seek your own professional assistance to help with your unique tax and financial situation and needs.
The Delivery Driver's Tax Information Series Disclaimer

Step 1: Get a basic idea what you are taxed on.

Knowledge is power sign relating especially to independent contractor taxes
You don't need to be a tax expert but it helps to have a basic understanding of how taxes work.

You don't have to be a tax expert. But it helps to have a basic idea of how taxes work.

The video below is a sketchboard illustration of how taxes work for self employed independent contractors, especially those of us who work with Grubhub, Doordash, Instacart, Uber Eats and other gig economy apps.

If you don't have the 18 minutes to watch the video, that's okay. So here it is in three simple statements. Each statement is linked to a part of our tax guide that goes into more detail than what we do here.

  1. Your taxes are based on profits, not on what you are paid by gig companies
  2. You'll pay income tax on your profits – these can vary a lot.
  3. You'll pay 15.3% self employment tax on Every. Dollar. of. Profit.

Once you have a grasp on that, it's easier to get an idea what to save. You can go into more depth with the video and other articles, but even a basic overview will help.

a. Taxes are based on profit, not earnings.

If you received $20,000 from Doordash this year, you aren't taxed on all $20,000. Not if you're keeping records anyway.

You will fill out a Schedule C on your taxes to show your earnings for your self employment business. On that, you will list your earnings and your expenses.

Then you will subtract the expenses from the income. It's the money that's left over that is the basis for your taxes. If you had $20,000 in earnings, and $10,000 in expenses, your profit is $10,000. The $10,000 is the taxable income, not the whole $20,000

This is why you MUST track your miles driven, and your expenses. To help with that, you may want to look at some of the tracking apps available. Two free ones are Hurdlr and Stride. We reviewed the Hurdlr app here and then reviewed the Stride Tax app here.

b. You'll pay income taxes on your profits


How much? There are so many variables related to income taxes that it's impossible to say what you can expect.

Rule Number 1: Get with a tax person to figure out your own particular details.

Do you have other income? Are you filing single or joint? Do you have dependents? Are there other withholdings like from a job? There are so many variables.

And then it gets goofy. The first several thousand dollars, you don't pay any tax on. Then you'll pay 10% income tax on later dollars, then maybe up to 12% or 22%.

If you want a simple rule of thumb, maybe figure on 10% of your profits for income tax.

That brings me to rule number 2: If you want better than a rule of thumb, see Rule #1.

Get a tax pro.

c. Self Employment tax is 15.3% on every dollar of profit.

Income tax is goofy and varies pretty wildly.

Self Employment tax is pretty easy. What did your business profit? Pay Uncle Sam 15.3% of that.

Think about Social Security and Medicare – the FICA taxes on a paystub. Ever notice those are taken out of even the smallest paychecks? They're charged on every dollar earned.

That's what your self employment tax is. It's your version of Social Security and Medicare. We just never think about that because employees never have to file those taxes.

But since the money's not withheld from our pay as contractors, we do have to pay it. You can't rely on deductions and exemptions here (other than your business expenses). You pay that on every dollar of profit.

Step 2: Figure out Your Profit Each Week

Picture of old calculators to use figuring out your profit for taxes
Do the math. What was left over after your expenses?

What did you earn for your business?

What did you spend?

What was left over? That's your profit.

It's a little more involved than that. Part of what you ‘spent' is the part that you can claim for your vehicle expenses. For the 2020 tax year, you can claim 57.5¢ of car expense for every mile you drive for business.

Here's the thing: I don't personally sit down and do book keeping every week. I just do a very basic calculation.

Earnings minus 57.5 cents per mile.

That's the profit that I base my tax savings on. I don't go to all the trouble to add up all the little things, because compared to my miles, they're very little.

If I made $500 and drove 400 miles, I take $500 minus (400 x 57.5¢). In other words, I multiply my miles times the mile rate. 400 miles at 57.5¢ each is $230.

$500 minus $230.

I pay taxes on $270.

Keep it simple. Otherwise you'll psych yourself out of doing anything at all.

Step 3: Figure out how much to save.

Start with your taxable profit.

In the example I gave above, $500 earnings and 400 miles, that came out to $270 in taxable profit.

Now you can do one of two things:

Calculate a percentage of your profit.

Use a third party app like Hurdlr or Quickbooks Self Employed to calculate your taxes for you.

Here's the thing: Don't stress too much. You don't have to get this perfect. Your main thing is you want to have enough to be in the ballpark.

Personally, I do the first one. I calculate 25% of my profit for the month. So far, every year, I've found that I would have gotten by just fine on 20%, but I like having that wiggle room.

If you have a lot of additional earnings, you can go as high as 30%. This is where a tax pro could help a lot.

I've been really impressed by how Hurdlr calculates taxes. You set up a tax profile, tell it about your filing status, and do you have other income. It will take all of that and figure out the percent for you.

Like in Step 2: I recommend simplicity. Don't overthink it. Don't make it so involved that you won't do it. That's why I like the flat 25%.

Step 4: Save it.

Don't touch a penny until you've pulled money out for your taxes.

I really discourage using instant cash out or instant pay for this reason: That money isn't yours yet. It's your business's. Get your money in, take care of your business (literally and figuratively) and then you can give yourself a paycheck.

Get into a weekly habit of setting aside money for your taxes BEFORE you touch a penny of it for yourself.
Get into a weekly habit of setting aside money for your taxes BEFORE you touch a penny of it for yourself.

Get a different bank account. Don't attach it to your checking. It's too tempting to spend it. Pull that money out and put it in a different bank account.

And don't touch that money for anything else.

Step 5: Send it In.

Every quarter, take the money you saved and send it in to the IRS.

This is you doing your own withholding for your employee, who happens to be you.

This is the best way to protect yourself. One, it protects you from spending the money. Two, it protects you from penalties and interest.

If you have to pay in more than $1,000 on tax day, penalties and interest can be added. If you're sending in money along the way, you avoid that problem.

Check out the link I put in that first line in this section. It goes into more detail, but the process is pretty simple. You fill out a form 1040-ES which is very simple. It boils down to “who are you and how much are you sending us?”

Again, don't stress. Just send it in. Do that and you won't have any major surprises come April 15.

There's a worksheet that the IRS gives you. It'll make your head spin. You don't have to do the worksheet. All it is is something to help you figure out how much to send in.

This takes me back to what I said earlier. Don't stress. Don't worry about being exact. Exact isn't possible until you've figured out your taxes for the year.

And don't make it too complicated. Complicated will make it easier to just give up. Don't do that.

To sum things up, here's what I do:

Understand: THIS IS NOT ADVICE. I'm not telling you what to save. If you want someone to tell you, either get a tax pro or at least use Hurdlr. This is my method, meant to illustrate one way to do things.

Each week:

I follow steps 2 through 4.

I do a quick profit calculation. Multiply my miles times 57.5 cents. Subtract that from my earnings.

I figure out 25% of that profit.

When all my payments come in from Doordash, Uber Eats, Grubhub etc., I have those sent to my business bank account. I don't touch a penny until I've taken out tax money, car expense money, and some paid time off money.

I put my tax money into a different bank account where I won't touch it.

Only after I've done all that will I transfer the rest to my bank account as my ‘paycheck.'

Each Quarter for the first 3 quarters:

That's April 15, June 15 and September 15 (no, those are not all 3 months from one another. It's just a weird IRS thing) I just send in everything that I've saved.

I fill out a 1040-ES where I tell them who I am and how much I'm sending in. And then I send it in.

On January 15:

This one is a bit different because is the last quarterly filing.

I do a quick run of what I think my taxes will be. It won't be precise because I won't have all the documents in, but I can get a ballpark.

Now I compare it to what I've sent in and what my wife's withholdings were. How am I sitting? What's the difference between those payments and what I think the taxes will be?

It's that difference that I'll send in. I'll keep the rest in my tax savings account, just in case.

And here's the thing: If it's close, I'll overestimate what I think I'll have to pay. It just makes it more accurate that way.

Why don't I just send the whole savings in on January 15? Nothing says you can't. I'd just rather have it in my bank. Why give the IRS an interest free loan?

This isn't the only way to figure your tax savings.

There are probably a lot of better and more accurate methods.

The IRS has their worksheets. You can always go by those, if you like to torture yourself.

I love that Quickbooks Self Employed and Hurdlr will calculate it for you. These are affiliate links. These are the two who do it the best that I know of.

How you calculate it isn't as important as it is that you save enough.

In the end, you're always better off to over save than not save enough. The worst case scenario is that you get a refund. That's better than scrambling in the end figuring out how you're paying this massive tax bill.

Stay on top of tax savings from day one. You'll make life a lot easier.

Yield: Makes live easier come tax day

How To Save For Taxes as an Independent Contractor with Grubhub, Doordash, Uber Eats, Instacart, Lyft

How To Save For Taxes as an Independent Contractor with Grubhub, Doordash, Uber Eats, Instacart, Lyft

How do you figure out how much to save for taxes as an independent contractor in the gig economy? I think we psych ourselves out with this one, making it more complicated than it needs to be. Follow these steps to figure out how to save.


  1. Understand how taxes work. Even if it's just a basic understanding, if you know what taxes are based on and how they are figured, it demystifies the whole thing.
  2. Figure out taxable profit for the week. Income minus expenses (don't forget mileage allowance). It's that simple.
  3. Decide how you will save. I use 25% of my profit from step 2. You can use a percentage or have an app like Hurdlr tell you what to save.
  4. Save it. Don't touch a penny you make until you've taken your tax money out. Put it in an account that isn't too tempting for you to spend.
  5. Send it in. Every quarter, send your savings in. This is your form of withholding.


Don't make it too complicated. Don't stress. If you make it simple, you're more likely to do it. If it's easier to do a quick percentage based calculation each week, then do that. If it's easier to let Hurdlr tell you what to do, do that.

It doesn't have to be exact or precise. That's impossible when you can't know the actual tax amount until you've actually put your taxes together. But you can get it in the ballpark. That's your goal here.

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The Delivery Driver's Tax Information Series (Grubhub, Doordash, Postmates, Uber Eats, Instacart)

The Delivery Driver's Tax Information Series is a series of articles designed to help you understand how taxes work for you as an independent contractor with gig economy delivery apps like Doordash, Uber Eats, Grubhub, Instacart, and Postmates. Below are some of the articles

Tax Guide: Understanding Your Income

The following three articles help you understand what your real income is as an independent contractor.

Tax Guide: Understanding Your Expenses

The following eight articles help you understand the expenses you can claim on your Schedule C. Most of these are about your car, your biggest expense.

Filling Out Your Tax Forms

Once you understand your income and expenses, what do you do with them? Where does all this information go when you start filling out your taxes?

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