Gig and App Income: 1099-NEC, 1099-K and Self-Employment Tax Explained

If you drive for a ride app, deliver food, clean houses, do hair, or freelance, the IRS sees you as self-employed. That changes how you're taxed. Here's what you need to know for your 2025 return.

The forms you might get

• Form 1099-NEC: from a business that paid you for services (generally when it paid you $600 or more in the year)
• Form 1099-K: from a card processor, payment app or marketplace that processed payments for you
• No form at all: you still have to report the income

All of it goes on Schedule C, Profit or Loss From Business. Getting a form, or not getting one, doesn't change whether the money is taxable. All business income is.

Self-employment tax

When you work for an employer, they pay half your Social Security and Medicare taxes and take the other half from your paycheck. When you're self-employed, you pay both halves. That's self-employment tax:

• 15.3% in total: 12.4% for Social Security and 2.9% for Medicare
• It applies to 92.35% of your net earnings from self-employment
• You owe it if your net earnings are $400 or more
• You get to deduct half of it when figuring your income tax

This is in addition to regular income tax. It's figured on Schedule SE.

The upside: it builds your Social Security record, which counts toward your retirement and disability benefits.

What you can deduct

Expenses that are ordinary and necessary for your work come off your income before tax. Common ones:

• Car expenses: either actual costs (gas, repairs, insurance, depreciation) for the business share, or the IRS standard mileage rate for business miles. You need a mileage log either way.
• Phone and internet: the business-use share
• Supplies and equipment
• Platform fees and commissions the app took out
• Insurance for the business

IRS Publication 334, Tax Guide for Small Business, and Publication 463, Travel, Gift, and Car Expenses, have the details.

The secret: the app's fees are usually inside the 1099-K number. A 1099-K shows the gross the customer paid, not what landed in your bank account. If the app kept 25% in fees, that 25% is a deduction, but only if you claim it. Download the annual summary from each app (most have a tax summary in the account settings), and your preparer can deduct the fees, tolls and other charges that the gross figure hides. People who report only their 1099-K and nothing else often pay tax on money they never received.

Estimated taxes

No one withholds tax from gig income. If you expect to owe $1,000 or more for the year, you generally need to make quarterly estimated payments. The due dates and safe harbors are in our estimated tax guide.

Credits still count

Self-employment income is earned income, so it can qualify you for the Earned Income Tax Credit and the refundable Child Tax Credit. See the 2025 EITC table.

Keep records all year

• A mileage log (an app or a notebook in the car)
• Each platform's annual summary
• Receipts for supplies and equipment
• Bank statements

A worked example

Here's a simplified year for a delivery driver (numbers made up for illustration):

Item	Amount
Gross payments shown on the app's 1099-K	$30,000
App fees and commissions inside that number	($6,000)
Car expenses for business miles	($5,500)
Phone, business share	($600)
Insulated bags and supplies	($200)
Net profit (Schedule C)	$17,700

Self-employment tax: $17,700 × 92.35% = $16,346 of net earnings. × 15.3% ≈ $2,501. Half of it, about $1,250, is deducted when figuring income tax.

If the driver had reported only the $30,000 and claimed nothing, the profit would be $30,000 and the self-employment tax alone would be about $4,239. That's roughly $1,700 more in self-employment tax, before income tax, from skipping the deductions.

Common mistakes

• No mileage log. Without one, the car deduction is hard to defend. Start one today.
• Counting commuting. Driving from home to a regular workplace isn't business mileage. For gig drivers, the rules depend on how the work is done; ask your preparer.
• Forgetting small platforms. If you drove for two apps or sold on a marketplace, each one counts.
• Treating tips as separate. Tips paid through the app are income too.
• Not saving for tax. A simple rule many people use: set aside a percentage of each payout in a separate account so April isn't a surprise.

If you also have a W-2 job

Your W-2 wages already paid Social Security tax through payroll. When you add self-employment income, Schedule SE takes the wages into account so you don't pay the Social Security portion twice on the same earnings above the yearly wage base. You still owe the Medicare portion on all of it. Your preparer will figure it from both your W-2 and your Schedule C.

Find a TaxWallet office

A TaxWallet preparer can put your app income, fees and expenses on Schedule C correctly. Get an estimate.

FAQ

Do I have to report gig income if I didn't get a 1099?

Yes. All income is reportable whether or not you got a form.

What's the self-employment tax rate?

15.3% on 92.35% of net self-employment earnings, owed when those earnings are $400 or more.

Can I deduct my car?

The business share of it, using actual expenses or the standard mileage rate, with a mileage log.

Is my 1099-K amount what I owe tax on?

No. It's gross. Your tax is on your profit after fees and expenses.

General information, not tax advice.