When you shop for Instacart, you have two goals — boost your profits and save on your taxes. Here’s how to do it.
Know Before You Start
Being an Instacart shopper isn’t like other jobs. The main difference is that you’re usually considered self-employed.
The Instacart shoppers most people are familiar with are the full-service shoppers who both shop and deliver customer orders. Those drivers are almost always self-employed independent contractors.
Instacart also uses store shoppers who only shop orders either for customer pickup or another delivery service. Store shoppers can be employees or independent contractors depending on where you live.
Full-service shoppers and store shoppers who are independent contractors have two key things to keep in mind:
- Instacart doesn’t take out taxes. You’ll need to set aside money to pay taxes each quarter (more below).
- Instacart doesn’t pay for gas or other expenses. You have to pay your expenses from your income. If you’re looking at Instacart pay estimates, remember to check if it’s before or after expenses. You can claim your expenses as tax deductions (more below), but make sure you know how much you’re actually earning.
To learn more about how much you can make on Instacart, check out Is Instacart Worth It?
During the Year
During the year, there are two important steps you need to take to manage your Instacart taxes.
First, make sure you’re tracking all of your expenses. There are many apps you can use that automatically track your mileage and other expenses. Don’t wait until April to figure out your expenses because you might forget things or not have enough proof.
Second, you’ll need to pay estimated taxes. Payments are due in April, June, September, and January for tax returns due the following April.
Now that you’re aware of these two important steps, keep reading to learn the specific details of what you need to do as an Instacart shopper.
Filing Instacart Taxes
Instacart taxes are much easier than dealing with crazy Instacart customers, but you have to go step-by-step.
Determining Your Instacart Income
You have to report all the electronic payments you receive through the app plus any cash tips as income.
You may be able to take tax deductions, but we’re not there yet. When your tax return asks for income, it means everything you got paid, not after expenses.
Don’t try to not claim tips, either. Restaurant workers have tried all the tricks in the book such as trying to argue tips are gifts not income. The IRS said no.
Getting Your Instacart Tax Forms
Instacart sends its independent contractors Form 1099-NEC. You will get an Instacart 1099 if you earn more than $600 in a year. The IRS requires Instacart to provide your 1099 by January 31st each year.
If you’re in an employee position, Instacart will send you a W-2 by January 31st.
When you join Instacart, they will ask you to provide either a W-9 or W-4.
W-9s are for independent contractor positions and tell Instacart your legal name, address, and tax identification number. There is no tax withholding for self-employed independent contractors (more below).
W-4s are for employee positions and also let you set your tax withholding.
How do you get your 1099-NEC from Instacart?
Instacart sends their tax forms using Payable. If you don’t receive your Instacart 1099, contact Shopper support or email@example.com. Remember you may not get a 1099 if you made less than $600 during the previous calendar year.
Can you file your Instacart taxes if you haven’t received your 1099?
Yes, your 1099 just tells you and the IRS what you made last year. You don’t need the 1099 to file your tax return if you already know how much you made. You just enter the amount that would be on your 1099.
Some tax software asks you to enter your 1099s. This is just to help it do the math for you. It doesn’t matter if you enter your income as a 1099 or if you enter it as business income not reported on a 1099.
The reason you don’t have to enter each 1099 tax form is that your tax return only shows your total business income on a single line. Your tax software only asks for things separately to make sure you don’t forget anything.
If you want to enter a 1099 for Instacart before you have it, you’ll need the following information.
- Your total earnings from January 1st to December 31st. You can find this in your shopper account or keep records in your own bookkeeping app.
- Instacart’s official name is Instacart (other delivery companies use different legal names on their tax returns).
- Instacart’s EIN is 46-0733335.
- Instacart’s business address is 50 Beal, 6th Floor, San Francisco, CA, 94105.
What’s the Instacart business code?
You can enter 812900 (Other personal services) as the business activity code when you file your taxes.
Taxes You’ll Pay as an Instacart Shopper
Self-employment income is subject to income taxes according to your tax bracket the same as any other income. You’ll also pay self-employment taxes.
All federal taxes are on your taxable business profit after your business deductions.
What are self-employment taxes?
You pay the full Social Security and Medicare taxes that both an employee and employer would pay. That’s a tax rate of 15.3% for most people.
At a W-2 job, you pay 7.65% through your FICA withholdings and your employer pays the other 7.65%. This includes shoppers who are employees.
What about state taxes?
If you’re in a state with an income tax, you’ll also likely need to pay state income taxes on top of your federal income taxes. This would usually work just like any other income you have to pay state income taxes on.
In most states, you simply transfer the numbers over from your federal tax return. You’d then pay tax based on the net profit you already calculated.
What about city taxes?
Some cities also have their own income tax. If that applies to you, you’ll also need to pay city taxes.
How do you calculate an estimate of how much you’ll pay in taxes?
You can follow these steps to do napkin math or make your own spreadsheet. Many people also prefer to use last year’s tax software to estimate the Instacart taxes they’ll owe.
- _____ Earnings in your Instacart shopper app
- _____ Cash tips
- _____ Deductible business expenses
- _____ Your profit = Line 1 + Line 2 – Line 3
- _____ Line 4 x 15.3% = Your self-employment tax
- _____ Line 4 x 73.88% = Your taxable income after the deduction for 1/2 of self-employment tax and the Qualified Business Income deduction
- _____ Look up Line 6 in your tax bracket to find the income tax you owe
- _____ Line 5 + Line 7 = Your total federal tax
- _____ Line 8 x 25% = What you should set aside for quarterly taxes
Keep in mind that this is a rough estimate that doesn’t account for your other deductions or credits or any other income you have. What you’ll owe also depends on your filing status and whether your spouse has income.
If you don’t feel like doing the math, most people can get pretty close to what they’ll owe by setting aside 25-30% of their profits for taxes.
When are Instacart taxes due?
Instacart shoppers typically need to file personal tax returns by April 15th for income earned from January 1st to December 31st the prior year.
You’ll include your income and expenses on Schedule C of your Form 1040.
If you have a W-2 job or another gig, you report your employee and self-employed income on a single tax return.
What tax software should you use to file your tax return?
There are many tax filing software providers you can use to file your Instacart taxes. They range from free DIY options to online accountants who will do everything for you.
Does Instacart take out taxes?
Instacart does not take out taxes for independent contractors. Plan ahead to avoid a surprise tax bill when tax season comes.
- To pay your taxes, you’ll generally need to make quarterly tax payments (estimated tax payments) throughout the year.
- If you do Instacart for extra cash and have a W-2 job, you have the option to increase your withholding at that job to cover all of your taxes instead of making quarterly payments. You can also do a combination of increased withholding and quarterly payments.
Your quarterly taxes are due on:
- April 15th for income earned in January through March.
- June 15th for income earned in April through June (yes, you’re paying early).
- September 15th for income earned in July through September.
- January 15th for income earned in October through December. You can skip this payment if you file your taxes and pay your full balance due by February 15th.
For most people, your estimated taxes should add up to 100% of last year’s tax liability or 90% of the current year’s tax liability. If you don’t pay enough in estimated taxes, you could have to pay a penalty.
Instacart Tax Deductions
You can deduct your business expenses from your Instacart earnings on Schedule C of your tax return.
Business expenses are not itemized deductions on Schedule A. You don’t have to itemize to claim business deductions.
The most common tax deductions for Instacart shoppers are:
Mileage covers your expenses like gas, car maintenance, insurance, roadside assistance, and more. You can choose between using a standard mileage rate deduction or separately deducting gas and other expenses.
What mileage can you claim?
You can deduct trips from the store to your customers and back to the store. If you take multiple orders at the same time, you can also deduct trips between customers.
You generally can’t deduct your first trip from home to the store or your trip home from your last customer. Those first and last trips are considered commuting, rather than business, miles and aren’t deductible.
You’ll need to keep a mileage log with either your individual trips or your daily mileage. Most people use an automatic mileage tracking app.
Standard Mileage Deduction vs. Actual Expenses Method
Taking the standard mileage rate usually gives the biggest deduction for most people. In 2022, AAA’s Cost of Ownership Guide says the cost of owning almost all cars is above the current IRS standard mileage rate of 62.5 cents per mile. This is unusual and is due to skyrocketing gas and car prices.
You do have the option to track all of your car expenses separately and use the actual car expenses method instead of the standard mileage deduction. You’ll need to keep all of your receipts. You’ll also still need to track your business versus personal miles to prorate expenses like car repairs.
One thing to note is that if you choose the actual expenses method the first year you own your car, you generally can’t switch to the standard mileage deduction in later years. If you switch from the standard mileage deduction to actual expenses in a future year, you’ll have a paperwork mess and may have to pay back part of your deduction for depreciation.
I recommend considering the cost of ownership of your car for the last three to five years instead of just looking at 2022.
Cell phone bills
You can deduct your cellphone plan but only the portion of it you use for business.
You need to have a way of tracking your data, minutes, and texts and figuring out what percent of your phone bills are for business purposes versus personal use.
You can deduct the business percentage of your bill.
Food delivery bags, boxes, coolers, drink carriers, etc
If you buy gadgets or equipment to make shopping or delivery easier, it’s potentially deductible. For these items, you really want them to be something you use only for business and never for any personal uses.
You can try for a partial deduction if you also use it for personal reasons, but the IRS could get picky and deny it. It’s one of those things where you can be technically correct, but it may not be worth fighting.
Health insurance premiums
If you buy health insurance and aren’t eligible for health insurance coverage through an employer or certain other sources, your monthly health insurance premium is generally deductible.
This is a separate form from your Schedule C. Be sure to answer your tax software’s questions about health insurance.
Do Instacart shoppers qualify for the 20% QBI deduction?
Since you’re an independent contractor and classified as a sole proprietor, you qualify for the Section 199A Qualified Business Income deduction.
For most Instacart shoppers, you get a deduction equal to 20% of your net profits. That means you’d only pay income tax on 80% of your profits.
You don’t get the QBI deduction on the 15.3% in self-employment taxes.
Can you deduct your retirement contributions?
Your profits count as earned income that you can put into a Traditional IRA or Roth IRA.
If you want to boost your retirement savings, you can open a SEP IRA or solo 401(k). This allows you to make tax-deductible employer contributions of up to 20% of your profits.
If you don’t have a 401(k) at work or choose not to use it, you can also make your full employee contribution to a solo 401(k). Note your 401(k) employee contribution limit applies for all of your 401(k)s combined, not per job.
Here are some of the other top questions from Instacart shoppers.
Can you work for Shipt and Instacart?
Yes, as an independent contractor, you can work for both Shipt and Instacart. Shipt taxes are pretty much identical to Instacart taxes.
Include both Shipt and Instacart work as well as any other similar gigs on the same Schedule C.
You may also want to check out the best times to do DoorDash. They’ll often be different than the best hours for personal shoppers.
Does the tax-exempt card mean you don’t have to pay taxes?
There’s been some confusion over whether Instacart is tax-exempt because you need to use a tax-exempt card while shopping. This applies to sales tax and does not affect your income tax on your earnings.
Sales tax is only charged to the final customer. Because the customer pays applicable sales taxes on their final total with Instacart, Instacart doesn’t pay sales tax to the grocery store like a direct retail customer does.
Doing taxes for Instacart isn’t hard, but you need to take the time to learn how to do it.
Make sure you keep track of your deductions, like your mileage and other business expenses.
You can file your taxes on your own, but you can also use a tax preparer the first time you file if you want to make sure you do it right.