How to set aside money for taxes as a gig worker

Driving for a rideshare app, delivering food, freelancing online — gig work puts cash in your pocket fast. But there is a catch. Nobody withholds taxes for you. That job is yours now.

If you do not plan for it, you could owe hundreds or even thousands of dollars come April. That is a stressful surprise nobody needs. The good news is that a little planning now can make tax season much easier.

Understand why gig workers owe taxes

When you work a regular job, your employer takes out federal and state income taxes from each paycheck. They also cover half of your Social Security and Medicare taxes.

As a gig worker, you are considered self-employed. That means you pay all of those taxes yourself. The self-employment tax alone is about 15.3% of your net earnings. Add income tax on top of that, and the total can add up quickly.

A simple rule: set aside 25 to 30 percent

A good starting point is to save 25% to 30% of every payment you receive from gig work. This is not a guarantee of what you will owe. Your actual tax bill depends on your total income, deductions, and your state's rules. But this range gives most gig workers a reasonable cushion.

For example, if you earn $500 delivering groceries this week, set aside $125 to $150 right away. Treat it like it was never yours to spend.

Open a separate savings account

This is one of the most helpful things you can do. Open a free or low-cost savings account just for taxes. Every time you get paid, move your 25-30% there immediately.

Keeping tax money separate means you will not accidentally spend it on rent or groceries. Many online banks and credit unions offer free accounts with no minimum balance. Look for one that does not charge monthly fees.

Pay estimated taxes four times a year

The IRS expects self-employed people to pay taxes throughout the year, not just in April. These are called quarterly estimated tax payments.

The due dates are roughly in April, June, September, and January. If you skip these payments and owe more than $1,000 at tax time, the IRS may charge a small penalty.

You can pay online at IRS.gov using the IRS Direct Pay tool. It is free and does not require a bank account with a minimum balance.

Track every dollar you earn and spend on work

Keeping good records helps you in two ways. First, you always know how much you have earned. Second, you can deduct work-related expenses, which lowers the amount you owe.

Common gig worker deductions include mileage driven for work, a portion of your phone bill, and any supplies you bought for the job. Keep receipts and use a free app or a simple notebook to log your miles and expenses.

More deductions mean a smaller tax bill. That is money back in your pocket.

What if you are already behind?

Do not panic. Start saving what you can right now, even if it is only 15% or 20%. Every dollar you put aside helps.

If you end up owing more than you can pay at once, the IRS offers payment plans. You can apply at IRS.gov. It is better to set up a plan than to ignore the bill.

You can handle this

Setting aside tax money feels hard at first, especially when money is already tight. But once it becomes a habit, it gets easier. Even small, consistent steps add up over time.

Start with your next payment. Move 25% to your tax savings account before you do anything else with it. Future you will be very glad you did.