Federal income tax
Applied to your net profit at your federal bracket. Lowered directly by your mileage and business deductions.
Reference
Gig driver state taxes.
Federal tax is only part of the picture. Here is how state income tax works for 1099 drivers, which states skip it, and how it stacks on top of what you already owe the IRS.
As a gig driver you are a 1099 contractor, and your federal obligations get most of the attention: income tax, plus the 15.3 percent self-employment tax. But unless you live in one of a handful of states, there is a third layer on top: state income tax. It is worth understanding, because it changes how much of each dollar you actually keep.
The good news is that the same records that drive your federal return usually drive your state return too. Most states start from your federal net profit, so the miles and expenses you track to lower your federal tax generally lower your state tax as well.
The layers
What a driver actually owes.
For most drivers, three separate taxes apply to the same net earnings. State income tax is the one people forget.
Self-employment tax
A flat 15.3 percent on your net earnings, covering Social Security and Medicare. It applies in every state, including the no-income-tax ones.
State income tax
In most states, an additional tax on the same net earnings. Rates and brackets vary widely by state, and nine states do not charge it at all.
The nine states with no income tax.
If you drive in one of these states, you owe no state income tax on your driving earnings for 2026. You still owe federal income tax and self-employment tax, which apply everywhere.
- Alaska
- Florida
- Nevada
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
Two of these have footnotes worth knowing. New Hampshire finished phasing out its old tax on interest and dividends as of January 1, 2025, so wages and self-employment income are now untaxed there. Washington taxes only certain high-income capital gains, not your driving income. None of the nine tax the money you make behind the wheel.
One honest caveat: no income tax does not mean no taxes. These states tend to lean harder on sales and property taxes to make up the difference, so your overall burden depends on more than the income-tax line.
If your state does have an income tax.
The other forty-one states plus D.C. tax personal income, but the way they do it varies a lot. Some use a single flat rate, others use brackets that rise with income. Some also have local or city income taxes on top of the state rate. Because the specifics change year to year and differ by state, the only reliable source for your exact rate is your state Department of Revenue.
A few practical points that hold in most income-tax states:
- Your state usually taxes the same net profit the IRS does, so your mileage deduction typically reduces your state tax too.
- Many states have their own quarterly estimated-tax requirement that runs alongside the federal one, with its own form and deadlines.
- If you drive across state lines, you may owe tax in more than one state, which is worth asking a CPA about.
Common questions
State taxes, answered.
Do gig drivers pay state income tax?
In most states, yes. If your state has an income tax, you generally owe it on the same net earnings the IRS taxes, on top of federal income tax and the 15.3 percent self-employment tax. Nine states have no broad personal income tax in 2026. Drivers in those states still owe federal tax.
Does the mileage deduction lower my state taxes too?
In most states, yes. Many states start from your federal net profit, so the mileage deduction that lowers your federal taxable income usually lowers your state taxable income as well. The exact interaction depends on your state, so confirm with your state Department of Revenue or a CPA.
Does MileShield calculate my state tax?
MileShield's estimates focus on your federal picture: the mileage deduction, income tax, and self-employment tax. State tax varies too much by state to model reliably, so you apply your own state's rate on top. The deduction MileShield captures still lowers your state taxable income in most states, since states generally start from your federal net profit.
State tax rules and rates change every year and vary by state. This page is general education, not tax advice. Confirm your specifics with your state Department of Revenue or a qualified CPA.