Is DoorDash Self-Employment? (Yes, And That Can Be A Good Thing)

Is DoorDash self-employment? One of the important characteristics of working for DoorDash is that you aren’t an employee of DoorDash. Rather, you’re an independent contractor. Being an independent contractor is the same as self-employment in that you’re technically acting as your own business. In essence, you’re both an employee of yourself and the employer for yourself – a business of one, if you can wrap your head around that concept.

Being an independent contractor, rather than an employee comes with its own set of challenges to consider. Since you’re technically you’re own business, it means you’re responsible for things that a business is responsible for – things like paying your taxes, dealing with benefits, paying your own expenses, and figuring out how to earn a profit on your work. 

But being an independent contractor comes with some interesting benefits that most people don’t think about. In this post, I want to go over everything you need to know about self-employment when working with DoorDash, as well as briefly discuss the major benefits that come with self-employment.

Is DoorDash Self-Employment?

The concept of self-employment can be a bit confusing if you are only familiar with the typical employer-employee relationship. The basic difference between being an employee vs. being self-employed comes down to control – how much control does the company have over your work? Things like whether the company can tell you when to work and how you’ll complete your work are typical factors that weigh into the employer-employee relationship vs. independent contractor/self-employment (The IRS has good information about these factors on their website).

Going into significant detail about the differences between an employer and an independent contractor/self-employment is beyond the scope of this post, but the important thing to know is that when you’re delivering for DoorDash, you’re working as an independent contractor – i.e. you’re technically self-employed. 

The easiest way to think about what self-employment means is to think of yourself as your own little company. You are the CEO of your own little business. You’re also the sole employee. Your relationship with DoorDash is a contract relationship between two businesses where DoorDash sends your business assignments that you, as CEO of your own little company, can decide to accept or reject.

Things You Need To Think About When You’re Self-Employed With DoorDash

Here’s what you need to think about when it comes to DoorDash self-employment.

1. You’re Responsible For Paying Your Own Taxes

Perhaps the most important thing about being an independent contractor is that you’re responsible for paying your own taxes. With a regular W-2 job where you’re an employee being paid by an employer, your employer is required to automatically withhold taxes for you. The benefit of this is that withholding taxes means you won’t accidentally get caught with a huge tax bill at the end of the year.

By contrast, as an independent contractor, you’re paid the full amount you earn without any taxes withheld. This means it’s very important that you set aside money so that you can cover your tax bill. The biggest mistake I see new Dashers make is spending all of the money they earn and then finding out they owe a ton of money in taxes when they do their taxes in April. 

The best advice I have when it comes to taxes is to set aside a percentage of your earnings each time you get paid and put it in a separate bank account. For most people, I recommend setting aside 30% of your earnings to cover your potential tax bill. I personally set aside 1/3 of my earnings. 

You can manually remember to set aside a percentage of your earnings, but an easier thing to do is to open a separate business checking account that automatically sets aside a percentage of your earnings each time you get paid. I use Found, which is a business checking account that has no fees or minimum balance requirements. What I like most about it is that each time I get paid, Found automatically sets aside part of my earnings and puts it in a separate account. That way I don’t have to think about it at all. I manually set my percentage to set aside, but you can also tell Found how much you make in a year and it’ll automatically determine how much you should set aside.

Here’s an in-depth review I did about Found if you want to learn more about this account and how it works.

2. You Pay Your Own Expenses

As a Dasher, you’re responsible for your own expenses. For most people, that will mean vehicle costs – things like gas, parking costs, and any maintenance you need to do on your vehicle. The additional wear and tear you put on your vehicle should also be considered as part of your costs. Because you’re responsible for your own expenses, you need to balance your expenses with your earnings. Just like any business, you can only make a profit if your earnings are more than your expenses. 

Minimizing your expenses is an important part of delivering with DoorDash. If you drive, that means driving a fuel-efficient vehicle that’s easy to maintain (here are some good cars to use for DoorDash). 

For me, I minimize my expenses by delivering for DoorDash using an ebike or electric scooter. By doing that, I don’t have to worry about fuel or parking.  cost of maintaining a bike or scooter is minimal, especially when compared to a car. As an extra benefit, I have way more fun delivering for DoorDash on a bike (it’s way less stressful).

3. No Benefits

As an independent contractor, DoorDash is not responsible for providing you with any benefits. This means you don’t get health insurance or retirement accounts, nor any sort of paid time off. With DoorDash, you only earn money when you’re working. If you rely on your DoorDash income, it’s important to set aside money to cover yourself if you decide to take time off. One nice thing about DoorDash, however, is that you can DoorDash while you’re traveling, so you can still earn money even if you’re in another city.

For health insurance, assuming you don’t have a full-time job that provides health insurance, you’ll need to get your benefits somewhere else. DoorDash has a partnership with Stride that allows Dashers to purchase health insurance through their marketplace. Your state should also have a health insurance marketplace where you can purchase health insurance. I own my own business, so I don’t have an employer to provide me with health insurance. For health insurance, I get it through my state’s health insurance marketplace. I opted for a high-deductible health plan, which comes with lower premiums, but has a higher deductible and out-of-pocket cost. For me, the lower premiums of a high-deductible health plan make sense. Going with a high-deductible health plan also gives me access to a Health Savings Account, which is a tax-advantaged account that I use as an additional investment account. 

Finally, I’ll talk about retirement accounts more in the next section of this post, but the short of it is that when you’re self-employed, you don’t get access to a traditional 401(k), but you can use a Solo 401(k), which is a special tax-advantaged account for self-employed individuals. This is an extremely valuable account that you should take advantage of if you earn any sort of self-employment income, including income from DoorDash or other gig economy apps.

4. You Have To Pay Self-Employment Taxes

One thing about being self-employed is that you have to pay self-employment taxes. Whenever you earn employment income in the United States, both the employer and the employee are responsible for paying FICA taxes on that money. These are the taxes that pay for social security and Medicaid. The employer and employee split these taxes and the money is automatically withheld from your paycheck.

When you’re self-employed, things change because as a self-employed worker, you act as both the employer and the employee of your business. That means whenever you earn income from DoorDash, you’re responsible for paying both the employer side and the employee side of the FICA taxes. You can deduct the employer portion of these taxes as a business expense, but it is still an expense you’re paying that you wouldn’t otherwise pay as a traditional employee.

For more information about how self-employment taxes work, check out this post I wrote: Understanding Your Side Hustle Taxes.

Benefits Of DoorDash Self-Employment

While there are some downsides to self-employment with DoorDash, the benefits, I think, outweigh the costs. Here are some of the main benefits I take advantage of as an independent contractor with DoorDash.

1. Making Your Own Schedule And Choosing Your Own Jobs

The biggest benefit of being an independent contractor (or self-employed) is that you can choose when you work and what type of jobs you accept.

For people with full-time jobs or who use DoorDash as a side hustle, this flexibility is key. Even if you’re Dashing full-time, having the flexibility to work when you want is invaluable. If Dashers were employees, we’d lose this flexibility, and using DoorDash as a side hustle would be impossible for many people.

2. Access To A Solo 401k

The little-known benefit of being an independent contractor for DoorDash is that it gives you access to additional tax-advantaged accounts that most people don’t have access to. That’s because when you deliver for DoorDash, you’re technically self-employed, which means you’re running your own little business. This makes you eligible to contribute to self-employed retirement accounts such as the Solo 401k.

A Solo 401k is interesting because it allows you to save even more money than what you’d be able to save in a traditional, employer-sponsored 401k. While most people think that not having access to employer-sponsored retirement accounts is a negative, I see it as the opposite. The government actually makes it better to be self-employed because you can save more money in tax-advantaged accounts compared to what you’d be able to save in an employer 401k. 

When I first started Dashing, I set up a Solo 401k with Fidelity. This allowed me to put away extra money. I still use this tax-advantaged account today to maximize my retirement savings.

3. Access To Business Credit Cards

Another under-appreciated benefit of being self-employed with companies like DoorDash is that it gives you the ability to apply for business credit cards. This is more of an advanced tactic, but if you’re good with credit cards and paying your bills on time, getting business credit cards can be an excellent way to earn a lot of credit card rewards. 

The key is that business credit cards often have lucrative signup bonuses. To be eligible to apply for a business credit card, however, you need to have a business. And even though it doesn’t seem like it, delivering for DoorDash is self-employment income, which absolutely qualifies you as a business and makes you eligible to apply for business credit cards.

The benefits are massive if you understand how to use credit card rewards to your advantage. Indeed, I haven’t paid for a flight or hotel in over 7 years thanks to all the credit card points I’ve been able to accumulate.

This isn’t something you’ll want to do if you have issues with handling your money, but if you’re in a comfortable financial position and are comfortable opening new credit cards, being able to open business credit cards is a huge benefit.

4. Ability To Use Deductions To Your Advantage

Finally, being self-employed with DoorDash gives you the ability to deduct some of your regular expenses as business expenses, reducing your taxable income and, in effect, letting you pay for certain expenses with tax-free money.

There are some obvious expenses, mainly your vehicle mileage. The IRS allows you to deduct a specified amount per mile you drive. If you’re using a bike, things like bike maintenance are also obvious expenses that you can deduct.

Beyond the obvious expenses, other expenses can apply too. For example, delivering for DoorDash requires a phone plan. A good argument can be made that part of your phone bill is a deductible business expense. After all, without a phone, you wouldn’t be able to deliver for DoorDash.

Think about the normal things you might already be paying for. Those things may tie to your self-employment income in some way.

Note that I am not a tax professional and this is not tax advice. You will need to confirm any deductions you take with your tax professional.

Final Thoughts

DoorDash is self-employment. When you deliver for DoorDash, you are working as an independent contractor, which means you are your own little business. 

The important thing is to treat yourself like a business. Keep good records so you can deduct expenses when doing your taxes. Be sure to set aside a percentage of your income to pay your tax bill at the end of the year. 

If you take advantage of all the benefits that come with self-employment, you’ll find that DoorDash can be very useful.