A recent survey found that 34% of current or recent college students do gig work and 31% of recent graduates use gigs as their primary source of income. The gig economy offers tremendous flexibility for students, especially as their course schedules become busier. Most college students have a job and file a tax return, but gig workers face an entirely different tax filing experience than their classmates who work a standard job. It can be stressful to file a tax return as a gig worker - keeping track of all of your records, finding all of the right deductions and credits, and making the right estimated tax payments. This installment explores some of the more common questions, and hopefully allay some of the most common fears, of students who have taken on gigs for income.
What expenses are deductible if I’m a gig worker?
As in all tax-related questions, it really depends on the situation. Business expenses are generally considered deductible if they are ordinary, necessary, and reasonable in amount, so the list of allowable deductions varies widely depending on the type of gig a student has taken on.
- An ordinary expense is an expense that is normal for that type of business. This does not mean that it is a recurring expense, just that it be an expense that someone operating that type of business would view as ordinary to the work. For example, an Uber driver may opt to deduct their mileage. This makes sense, as it is quite ordinary for an Uber driver to incur mileage as they work.
- A necessary expense is helpful or conducive to the work. This does not mean that the work could not be completed without the expense, but that it is helpful to it.
An expense is reasonable in amount if it is not excessive. For example, a freelance writer on a platform like Upwork could determine that a computer is both ordinary and necessary; however, they could not argue that the latest model gaming computer was reasonable in amount for a gig that requires word processing.
The best approach is to keep track of the receipts, make notes of whether things meet the criteria listed above, and be reasonable when you report expenses. Many taxpayers are concerned about “getting it wrong,” but the risk is intentionally doing something wrong. Taxpayers should rest assured that appropriately documented expenses that meet those criteria are fine to report. The IRS may have questions, but that is why documenting everything – and keeping it for at least three years – is essential. When in doubt, consult a tax professional.
Can I really deduct a portion of my rent and utilities if I’m a gig worker?
This is a common question. The answer is, you guessed it, it depends. The tax code is very specific that deducting the costs of business use of a home requires exclusive use of the space for business purposes. Topic 509 outlines the requirements for deductions like rent, utilities, or insurance. Importantly, deduction is highly unlikely if the space is also used for personal reasons.
Can I really deduct the cost of work clothes if I’m a gig worker?
This is another common question that is often discussed on social media. The tax code is clear that personal expenses, like clothing, commuting costs, or food are not deductible as business expenses. That is, expenses you would incur regardless of whether you were working are not business expenses. Some argue that specific clothing requirements make the costs of the clothing deductible – however, the tax code is clear that clothing must be conspicuous if worn outside of work to be deductible. Uniforms, if reasonable to be work outside of work, aren’t deductible… they are just clothes.
What is the difference between FICA, Self-Employment Taxes, and Income Taxes?
Most people still remember their first paycheck – and how much smaller it was than expected. Your first year as a gig worker can also be a bit of a surprise at tax time. Traditional employers process tax withholdings as part of payroll, so workers receive less of their earnings throughout the year. However, those withholdings help cover a worker’s tax bill. There are two main differences between traditional jobs and gig work.
Traditional payroll processes automate payment of payroll taxes (Social Security and Medicare) and income taxes; however, gig work leaves all of that to the worker. If you forget to save (or just don’t realize you’re supposed to), the tax bill in April can be a bit of a surprise. Here is a helpful blog from the National Taxpayer Advocate Service about common forms and tax issues for the gig economy.
| | Traditional Job | Gig Work |
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| Payroll Taxes | Withholdings, employers pay 7.65% and employees pay 7.65% | No withholdings, all due by end of year. Taxpayers pay full 15.3% (with opportunity to deduct half on their tax return). |
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| Tax Payments | Withholdings, employers keep an estimate of the employee’s tax liability each paycheck and submit it to the government. | No withholdings, all due by end of year. Taxpayers have to estimate their amount and send it in quarterly installments. |
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How do you manage the stress of it all?
First, take a moment to realize that you are not alone. Some estimate have at least 41 million people in the U.S. work in the gig economy. That’s a lot of tax returns – and there is no way they will all be prepared perfectly.
Next, reassure yourself that if you do make a mistake, you’ll just get a letter. As nerve-wracking as it may be to get a letter from the IRS, you’ll have time to respond and correct any issues. Despite the jokes scattered through television, the IRS is not in the habit of sending taxpayers to jail over an honest mistake. It can be frustrating to deal with notices, but it is generally a simple process.
Finally, if it feels like too much, there are people available to help. This survey shows more than 20% of gig workers who responded to the survey plan to pay for professional assistance with their tax return in 2025.