The Ultimate Tax Guide for Instacart Shoppers
As an Instacart shopper, you’re an independent contractor. And while working for yourself comes with its own perks, it also means that tax time is more complicated.
That’s why we’ve put together a custom tax guide for you, complete with insider tips from our tax specialists. Get the scoop on everything you need to know to make tax season a breeze.
When and How to File Taxes
Here are some of your common tax filing questions, answered:
Which Forms Should I Use to File My Taxes?
All taxpayers will need to file a Form 1040. This individual tax form summarizes all of the income you earned for the year, plus deductions and tax credits. This information is used to figure out how much you owe in taxes. Information from several other forms break down the types of income, deductions, and credits you want to claim.
As an Instacart Shopper, you’ll likely want to be familiar with these forms:
1099-NEC: Reports how much money Instacart paid you throughout the year. All companies, including Instacart, are only required to provide this form if they paid you $600 or more in a given tax year. You won’t send this form in with your tax return, but you will use it to figure out how much business income to report on your Schedule C. This used to be reported to you on a 1099-MISC, but that changed starting in 2020. Don’t worry, nothing changes on your end; you’ll just receive a different form than you have in years past.
W-2: Sent to full- or part-time employees. It shows your total earnings, plus how much of your owed tax has already been sent to the government by your employer. As an independent contractor with Instacart, you will not receive this form from them.
Schedule C: Where you report your business income and business expenses. Helps determine your business profit by subtracting business expenses from your income. The profit that you calculate is subject to taxation, and is reported on Line 12 of your Form 1040.
When Should I File My Taxes?
Most people know to file and pay their 2023 taxes by April 15, 2024. If you’re an Instacart shopper, you’re self-employed … and that means you likely owe quarterly taxes. If you have another part time job and also get a W-2, you’ll want to check out our guide here.
Because taxes are not withheld from their pay, most independent contractors are responsible for making quarterly tax payments based on their estimated annual income. If you owe more than $1,000 in taxes for the year and do not pay taxes quarterly, you’ll be hit with a late payment penalty by the IRS.
To file your quarterly taxes, you’ll need to calculate your estimated taxes and pay what you owe by each of these deadlines:
Q1 Deadline: April 15, 2024
File estimated taxes for January 1 to March 31Q2 Deadline: June 17, 2024
File estimated taxes for April 1 to May 31Q3 Deadline: September 16, 2024
File estimated taxes for June 1 to August 31Q4 Deadline: January 15, 2025
File estimated taxes for September 1 to December 31
Find out if you owe quarterly taxes here.
What Documentation Do I Need to File My Taxes?
One perk of being self-employed is that you get to deduct all your business expenses from your business income, which lowers your taxable business profit. In order to claim these deductions, though, you need to have sufficient proof of each expense. Examples of good proof include:
Mileage logs
Receipts with notes on them
Invoices for purchased assets (e.g. a new cell phone)
Phone bills
Whatever your documentation is, make sure it includes the:
Amount of the expense
Time and place of the expense
Business purpose of the expense
Name of the vendor for the expense
Don’t have all the documentation you need? Check out our guide for finding proof of past business expenses.
When Is the Best Time to Start Tracking Expenses?
It’s never too late to start tracking your business expenses. In fact, the sooner you start, the more earnings (and fewer headaches) you’ll get during tax season.
Who Can I Talk to if I Need Help With Taxes?
Instacart shoppers are always welcome to reach out to Stride’s team of tax and health insurance experts for year-round support. You could also consider working with a local tax preparer for help estimating your quarterly payments and ensuring your documentation is in order.
How Should I Prepare Financially for Tax Season?
Whether you need to pay taxes quarterly or annually, you’ll want to make sure you prepare by setting aside extra funds in your savings account ahead of each tax season. If you owe quarterly taxes, it is to your advantage to make each quarterly payment by the deadlines, or as soon after the deadlines as you can. This will reduce the penalties and interest you owe over time.
Stride Tip → If you ever owe more taxes than you can afford, and you’re not able to pay your entire owed tax on time, make sure to file your tax return anyway. There is a 4.5 percent late fee (plus interest) for each month your tax return is late, but only a 0.5 percent late fee for each month your payment is late. Get more tips on how to file your taxes late.
Where Do I Report Personal Deductions vs. Self-Employed Deductions?
While some tax deductions are related to running your business, others — like health insurance and charitable donations — are personal deductions. You’ll file these different expenses on one of two forms:
Self-Employed Deductions: Use the Schedule C form. If you use a tax filing software, this form will be automatically generated when you report that you are self-employed.
Personal Deductions: Use the Form 1040 and potentially the Schedule A form. Depending on how much your personal deductions end up valuing, your tax software may prompt you to take the standard deduction (a fixed amount based on your filing status) instead.
How Much Does It Cost to File a Schedule C?
Tax filing options vary in price from free to $500 (or more). That said, most people with simpler returns like to use more affordable tax prep software. Generally, you can’t use the free version to file self-employed tax forms.
How Do I Use the Stride App to Help File My Taxes?
Stride is a free app that makes it simple to find and track deductible business expenses, take pictures of receipts, and automatically record business mileage. When you’re ready to fill out your tax return, you can use the app to download an IRS-ready report of all your deductions throughout the year. You can use that to fill out your Schedule C.
Top Instacart Tax Deductions
As an Instacart shopper, here are seven deductions you should definitely be tracking:
1. Mileage
What kind of mileage can I deduct?
You can deduct any mileage you drive for work. This includes mileage:
When picking up orders
When delivering orders
Between deliveries
To the gas station while working
To shops for car maintenance
Heads up: Your mileage from to and from home at the beginning and end of your work day is NOT deductible.
How do I deduct my mileage?
There are two ways to deduct mileage. Depending on your vehicle, one option may save you a lot more money than the other:
The Standard IRS Mileage Deduction: You can deduct a fixed rate of 67 cents per mile in 2024, up 1.5 cents from 2023. This rate covers all the costs of operating your vehicle, like gas, depreciation, oil changes, and repairs. It’s typically the best option for most Instacart shoppers.
The Actual Expenses Method: This method lets you add up and deduct each of your individual business-related vehicle expenses. It’s typically a more cost-effective option for people who purchased a vehicle within the past year, or are paying monthly loan payments for a new vehicle.
Can I use this deduction even though part of the payment I get from Instacart is based on estimated mileage?
Yes! Although Instacart uses estimated mileage as one component in its calculation of how much payment to offer per batch, this is not a mileage reimbursement, so you can still deduct work-related mileage from your taxable income. Just make sure you have the documentation to back it up.
2. Your Phone (and Phone Bills)
You can deduct anything that is “ordinary and necessary” for your delivery job, including your:
Phone
Phone bills
And necessary phone accessories, like car holders, chargers, or clips
Where on my tax form can I add phone expenses?
You can include any cell phone expenses on Part 5 of your Schedule C. After totaling your other expenses, write the final amount on line 27a.
Can I deduct my entire phone bill from my taxes or only a percentage?
That depends. You can only deduct expenses as a percentage of business use. This means that if you use your cell phone for work 50 percent of the time, and for personal reasons 50 percent of the time, you can only deduct 50 percent of your phone costs.
Heads up: the IRS looks at technology deductions very carefully, so do your best to accurately estimate this percentage.
Stride Tip → One of the best ways to estimate work-related phone usage is to go through your phone records for a typical month, calculate how much of your data and phone calls occurred during work hours, and apply the average to the rest of the year.
Do I need receipts for all the phone accessories I bought for my job?
Any expense you deduct on your tax return should have good documentation to back it up. If you are missing receipts, we recommend looking through your credit card and bank statements for proof of their purchase.
3. Insulated Bags and Blankets
You can deduct anything that is “ordinary and necessary” for your delivery job. That includes any insulated bags and blankets you buy to keep food orders warm. Remember: the IRS is strict about using business supplies for personal reasons, so if you ever need a hot bag outside of work, be sure to use a separate one.
4. Tolls
Any toll fees that you pay while working are tax deductible, as long as they’re not already being reimbursed to you. Note: You cannot deduct tolls to and from work.
If you are missing documentation for any tolls, review past bank and credit card statements. You can access online statements for electronic toll collection devices, like an E-ZPass.
5. Parking
Sometimes you may choose to pay for parking in the city while working. That’s tax deductible! Unfortunately, traffic violations, speeding tickets, and parking tickets are not deductible because they’re incurred due to inappropriate driving and not directly because of work.
6. Roadside Assistance
Fees for AAA or other roadside assistance programs are tax deductible, but only the percentage that is used for work. You can use your business mileage log to determine the business to non-business mileage ratio for your car, and apply that ratio to find the deductible portion of your AAA membership.
7. Health Insurance
Monthly health insurance payments are deductible as long as you:
Are self-employed (for example, you shop with Instacart full-time)
Have a business profit (Profit = Business Income - Business Expenses)
Are not able to receive health insurance coverage from a spouse or employer
Don’t have health insurance? Now’s the perfect time to find your 2024 health plan. Four out of five people qualify for a plan for $10 or less per month, and you may be able to write off what you do pay as a business expense. Enter your zip code below to get started.
When deducting your health insurance, you’ll fill out Line 29 on Form 1040. Make sure to keep these two rules in mind:
If you receive a government subsidy on your monthly payments, you can only deduct the cost of your bill every month, not the original price of your plan.
If your net business profit for the year is lower than the total yearly cost of your health insurance premiums, then you can only deduct the amount equal to your business profit.
Learn more about deducting your health expenses.
Any more questions?
If you have a tax question we didn’t cover in this guide, check out our extensive tax tips or reach out to our award-winning support team.