As a Dasher delivering for Doordash, you're considered to be self employed. This means your Doordash income will be taxed like a business.
This is a good thing. You can reduce your taxable income by listing the costs of your Doordash delivery work.
This is the second of four FAQ articles on Doordash taxes, and the first of two related to expenses. The second article will deal specifically with car expenses.
How do expenses keep your taxes down? It's because your business income is taxed on the profits, not on the money you receive from Doordash (or any other apps if you multi-app). In other words, it's what's left over after your expenses. Therefore, understanding what expenses you can record and write off will help keep your taxes down where they should be.
This is NOT tax advice.
I am not a tax professional, and I do not speak for the IRS. Do not take any of these FAQ's to be tax advice.
These are questions that I've seen frequently asked about Doordash taxes, and especially about expenses. I've researched the answers, sometimes running them by tax professionals, and I'm providing the answers that I was able to find.
The purpose of this article is not to provide tax advice but to share information and the answers to my research about commonly asked questions. For tax answers and advice specific to your situation, you should seek out your own professional advice from a tax professional who can look at your particular business and offer answers that are best suited for you.
Frequently Asked Questions about Business Expenses and Doordash Taxes.
Here's a list of the questions that we'll ask. You can jump to the specific question below and its answer.
General questions on claiming business expenses on your Doordash Taxes:
- Can I claim my business expenses for Doordash deliveries if they are less than my Standard Deduction?
- What is the difference between business expenses and deductions when it comes to my Doordash taxes?
- Where do I claim my expenses related to Dashing?
- Why is it important to track expenses as a Dasher?
- What qualifies as a legitimate business expense as a Dasher?
- What do I need to do to claim my expenses?
Frequently asked questions about specific types of expenses when delivering for Doordash or others
- Can I claim the standard mileage amount if I use a bicycle, scooter, or motorcycle for my Doordash deliveries?
- If I can't claim miles for my bike, scooter or motorcycle, what can I claim?
- Am I able to claim my mobile phone and phone service bill since I need it to operate the Dasher app?
- If I paid someone else to help me with deliveries, can I claim those costs?
- What is depreciation, and where would I have any as a Doordash contractor?
- What is Section 179 depreciation and how would it apply to Dashers?
- What kind of insurance can I claim as an expense?
- Are there interest expenses I can claim for my delivery work with Doordash or others?
- Can I claim meals as a Doordash contractor?
- Can I claim meal costs if I have to pay for the food when I pick it up?
- What about the clothes I wear when I'm dashing? Can I claim those as a business expense?
- Is the $1.99 Fast Pay fee from Doordash a legitimate business expense?
- What type of rental expenses would I have?
- Can I claim the home office expense as a Dasher?
General questions about claiming business expenses on your Doordash taxes:
Can I claim my business expenses for Doordash deliveries if they are less than my Standard Deduction?
Yes. Your business expenses are treated differently than your personal deductions. Business expenses are recorded in the income portion of your tax return, on the same Schedule C form that you use to record your income from your Doordash deliveries. This allows you to take your business expenses and still claim the standard deduction.
What is the difference between business expenses and deductions when it comes to my Doordash taxes?
Expenses are related to your business activity. Deductions are related to personal activities.
Earnings from Doordash are taxed based on your profits, not on the money you received. This means that the taxable portion of your income is determined by subtracting your business expenses from the revenue you get from Doordash (or any other platforms you contract with). They are not treated the same as your personal deductions like mortgage interest, contributions, etc.
Where do I claim my expenses related to Dashing?
You do not include your business expenses in itemized deductions. In fact the Tax Cuts and Jobs Act eliminated a number of deductions. This is okay, because you actually claim your business expenses on a Schedule C. This is a form you fill out as part of the income portion of your taxes that lists both income and expenses for your business, and then determines the profit, which is your actual taxable income.
Why is it important to track expenses as a Dasher?
There are two reasons. The first is to keep your taxes down where they should be. The government only requires you pay taxes on your profits, on what is left over after your expenses are deducted. Tracking your expenses allows you to know what you can use to legally deduct from your taxable income. The second reason is that in order to claim an expense, the IRS requires you to have documentation. You need a record of the expense to show it was a legitimate part of running your business.
What qualifies as a legitimate business expense as a Dasher?
IRS Section 162 states that a business expense must be necessary and ordinary for the type of business you have. It cannot be a personal expense unrelated to your business. The expense must have a business purpose that helps you achieve the work of your delivery business and it must be a common or frequent type of expense related to your type of business.
What do I need to do to claim my expenses?
The first thing is to track it. Keep a record the expense where you can pull up your record. Best practice is to use a tracking or book keeping software like Hurdlr to record the expense and to store a copy of the receipt. Make a note about the business purpose of the expense and why it was necessary for your business. A good program will allow you to choose what category best fits your expense.
Then at tax time, you'll total up your expenses by expense category. Those totals will be written down on your Schedule C. Total expenses will be added up, and that total will be deducted from your business income. The total (your profit, or loss) will then be the basis for your taxes from your Doordash deliveries.
Frequently asked questions about specific types of expenses for Dashers
Note that frequently asked questions related to claiming miles on your Doordash taxes will be listed in an article dedicated just to vehicle related expenses.
Can I claim the standard mileage amount if I use a bicycle, scooter, or motorcycle for my Doordash deliveries?
No, bicycles and motorcycles do not qualify for the standard mileage deduction. Standard mileage deduction can only be used for cars, vans, pickup trucks, panel trucks and SUV's. The standard mileage deduction was intended to be a reasonable replacement based on normal costs of operating a vehicle. The cost of operating a bicycle, scooter or motorcycle is often far less than that of a car, van, or SUV. A mileage rate was never established for such vehicles, so your only option is to track the actual expenses.
If I can't claim miles for my bike, scooter or motorcycle, what can I claim?
You can claim the business percent of any costs related to the use of your bicycle, scooter, or motorcycle. For example, if 80% of your miles on your e-Bike were for your Doordash (or other app) deliveries, you could claim 80% of the costs. Costs could include fuel, repairs, parts, accessories, interest if financed, insurance and depreciation. You will need to keep records and receipts of all related costs.
Am I able to claim my mobile phone and phone service bill since I need it to operate the Dasher app?
You can claim your cell phone bill in the amount that equals the business percent of the use of your phone. If 30% of the use of your phone is related to your deliveries, you can claim 30% of your phone service bill and 30% of the equipment cost. If 100% of the use is business, you can claim 100% of the service and equipment costs.
Unfortunately I have not found a definitive answer as to HOW to determine your business use percentage. The rule of thumb had been to base it on percent of phone calls or minutes of use that were for business, however that dates back to a time when the primary use of the phone was for voice calls. You could use a call log, or pull data logs from your phones. Another method would be to calculate the total number of hours in a week you would normally be using your phone (business and personal combined) and then compare that to the number of hours you are actually logged into the Dasher (or other) app.
If I paid someone else to help me with deliveries, can I claim those costs?
Doordash does have provisions in their contract that make room for using subcontractors. This would make it reasonable that subcontractor expenses are a possibility. Such payments would be recorded under line 11 on Schedule C, for contract labor.
Keep in mind that if you pay out for labor, you have a responsibility to report that income. To keep yourself covered, you should have a written agreement with your contractor as well as a W9 on file. You should be reporting any contractor payments that total over $600 by submitting a 1099 form both to the IRS and your subcontractor.
What is depreciation, and where would I have any as a Doordash contractor?
Depreciation is the loss of value of an asset. Purchases of certain assets are not considered to be expenses, because you are receiving something of value in return for that purchase. Something is usually considered an asset if it has a higher value item that has a useful life of longer than a year. While payment for an asset is not considered an expense, the loss of value of the asset can be treated as an expense.
The most common example would be the value of your car. If you buy a $10,000 car, you receive a $10,000 asset in return, so there is no expense. However, if the car is only worth $8,000 a year later, the car has depreciated or lost value. The $2,000 loss in value is considered an expense. Note that you cannot claim car depreciation if you are claiming the standard mileage allowance.
Some of the most common items that a delivery contractor might depreciate would include higher end smart phones and motorcycles, scooters, e-bikes or bicycles that are used for delivery purposes. For things like this, you could claim the business percentage of the depreciation of the item. For example, if a scooter has a useful life of five years and you use it 75% of the time for business, you could depreciate 1/5 of the value of the scooter and claim 75% of that depreciation as a business expense.
What is Section 179 depreciation and how would it apply to Dashers?
The government has allowed instances where you would be able to write off the entire value of an asset immediately using what is known as a Section 179 Depreciation. In so doing, you would not be able to claim future depreciation on that item. There are also rules around selling items that you have fully depreciated and claiming that sale as income. Depreciation can be a complex matter and it is best to consult a CPA or tax professional for individual advice on how to take such deductions.
What kind of insurance can I claim as an expense?
Insurance that is part of operating your business can be claimed as a business expense. Some examples might be liability or business insurance. In some areas workers compensation for self employed individuals may be available. Commercial Auto Insurance is not something you can claim independently if you are claiming the mileage deduction. Health insurance for yourself is not something you can claim as a business expense, however there is an option to claim it as a personal income tax deduction on your 1040 tax return.
Are there interest expenses I can claim for my delivery work with Doordash or others?
You may have interest expenses that you can claim. If you have a loan on the vehicle you use for Dashing, you can claim the business percent of the interest portion of your car payment even when claiming the mileage deduction. If you have financed items that are being used for your delivery work, you can claim the business percent of the interest you are paying for such an item. For example, if you put an e-bike on a credit card and 80% of your use of the e-bike is for deliveries, 80% of the interest that is related to that purchase can be claimed.
Normally, independent contractors for gigs like Doordash would not have business loans. However, with pandemic relief programs such as the EIDL and Paycheck Protection Program, many gig workers may have loans through these programs and may have interest expenses from those loans.
Can I claim meals as a Doordash contractor?
Meals that you consume while on deliveries are not considered business expenses. They are personal expenses and should not be claimed. You may be able to claim 50% of some business meals if there is a business purpose. It would have to involve another person and you would need details of the business purpose of the meals. An example would be if you were to meet with someone to recruit them to deliver under the referral program. The potential for a referral fee provides a business purpose. Make sure to keep the receipt and record details of the conversation and how it relates to your business.
Can I claim meal costs if I have to pay for the food when I pick it up?
Generally, meal costs for customers will not be an expensable item. Doordash explains that when you pay out of pocket, they will reimburse you for the meal. The reimbursement is the key to whether you can claim the item as an expense. If Doordash pays you back for the meal as a reimbursement, that means they are not reporting that as income. If it is a reimbursement and not reported as income, you cannot claim the corresponding expense, as Doordash would actually be claiming that expense themselves. However, if you can establish that such reimbursement was reported as part of your 1099 earnings, you would have a case to claim that expense. Make sure that you keep any receipts and have precise records of what your delivery fees and exact payments were so you can document whether any reimbursement was reported as income.
What about the clothes I wear when I'm dashing? Can I claim those as a business expense?
Usually, no. Simply wearing clothes while out on your deliveries is not enough justification to call the cost of those clothes a business expense. The clothes would need a specific business purpose that distinguishes them from personal use. The IRS has held that clothes that are acceptable for street use are not considered a business specific uniform. If you were to purchase specific clothing items to identify you as a delivery contractor, such as Doordash gear or third party gear designed exclusively for delivery work, that clothing may be considered a business expense.
Is the $1.99 Fast Pay fee from Doordash a legitimate business expense.
You can claim the $1.99 instant pay or fast pay fee that Doordash charges as a business expense. You would treat this much like fees you pay to banks etc. Most will create a line item for bank and service fees under “Other expenses” on their Schedule C and record their total fees there.
What type of rental expenses would I have?
There are a variety of instances where you could pay for rentals to help you perform your work as a contractor. Some of these might include
- The business percentage of the lease on your cell phone
- Renting a scooter or e-bike short term to help you get around on deliveries
- Business portion of a car rental or lease on a vehicle that you do not claim the standard mileage amount
Can I claim the home office expense as a Dasher?
The IRS is very specific about what circumstances allow you to claim a home office deduction. They lay out two requirements. The space has to be 1)Regular and exclusive use for your business and 2)the principal place of your business. In other words, it has to be a space that is only used for your business and where the bulk of your business is conducted. Only you can say whether your office is used only for your Doordash or other delivery business. However, with our delivery work being more or less exclusively making deliveries out in the community, we would have a hard time making a case for the home office being a place where the substantial portion of our business is conducted.
Don't see your question above?
Leave a comment with a question that you don't see covered above. We can't guarantee we'll get to it but if it's one that might apply to a lot of Dashers, we can certainly research it, run it by tax pros that we know and see if we can update the article.