Gig economy: flexible work with real tax tradeoffs

If driving, delivery, freelance, or platform-based work has become part of supporting yourself or family while settling into a new country, that’s what’s commonly called the gig economy. Here’s what that actually means for your money.

What is the gig economy?

The gig economy refers to work arranged through short-term contracts, freelance assignments, or app-based platforms, rather than traditional, ongoing employment with a single employer. This includes driving for a rideshare app, delivering food or packages, freelance writing or design work, and many other flexible, often self-directed forms of work.

How the gig economy works

Unlike a traditional employee, most gig workers are classified as independent contractors, which changes several things about how pay and taxes work. According to the IRS’s Gig Economy Tax Center⁠(opens in new window), gig economy earnings are taxable and must be reported on a tax return regardless of whether a 1099 form is received, and platforms typically don’t withhold income tax or Social Security and Medicare contributions the way a traditional employer would. This means the worker is generally responsible for setting aside and paying these taxes, often through quarterly estimated tax payments. Gig income also typically doesn’t come with employer-provided benefits like health insurance or retirement contributions, which shifts more of the responsibility for these decisions onto the worker directly.

The gig economy for immigrants and newcomers

Gig work has become a primary income source for many immigrants, in part because it often has fewer upfront barriers than traditional employment, such as requiring less extensive credit history, and it can offer more flexibility for someone also managing English language learning, childcare, or other responsibilities during a challenging transition period. Understanding how immigrants are taxed on income from U.S. businesses⁠(opens in new window) more broadly helps clarify that gig income specifically follows the same underlying principle: earnings are taxable, and the responsibility for reporting them falls on the worker rather than a withholding employer.

Because taxes generally aren’t withheld automatically from gig income, many newcomers are caught off guard by an unexpectedly large tax bill the following year without having set aside a portion of earnings throughout the year. Additionally, gig income can fluctuate significantly from week to week, which makes budgeting, and particularly maintaining consistent international transfers to family, more challenging than it would be with a steady paycheck. Setting aside a percentage of every payment for taxes, and creating a buffer for lower-earning weeks, are genuinely protective financial habits to develop early.

Community context

How disruptive an irregular income schedule feels often depends on what kind of financial safety net exists elsewhere, whether that’s savings built up before arriving, family support, or a partner’s steadier income. Someone entirely reliant on gig income to cover both personal expenses and a regular remittance faces a different level of risk than someone using gig work as a supplement, so the specific budgeting approach that makes sense varies considerably by situation.

How to manage gig income effectively

1. Set aside a portion of every payment for taxes, typically 25 to 30 percent as a starting estimate, in a separate savings account not touched for regular spending.

2. Track income and expenses consistently, using a simple spreadsheet or an app designed for freelancers, since many gig-related expenses, like vehicle costs for a rideshare driver, may be deductible.

3. Make estimated quarterly tax payments if a significant amount is expected to be owed, since waiting until the annual filing deadline can result in penalties on top of the tax itself.

4. Build a buffer for lower-income periods, since gig income can vary considerably week to week, and even a small cushion protects the ability to cover both personal expenses and any regular support sent home.

Common deductions gig workers overlook

One of the genuine advantages of gig work, alongside its flexibility, is access to business deductions that a traditional employee generally can’t claim. Using a personal vehicle for rideshare or delivery work typically makes mileage or actual vehicle expenses deductible. A portion of a phone bill, if used for gig work, can often be deducted proportionally. A dedicated home office space used regularly for freelance or gig-related administrative work may qualify for a home office deduction. Equipment, software subscriptions, and certain supplies purchased specifically for gig work are also commonly deductible.

Many new gig workers either fail to claim these deductions at all, overpaying unnecessarily, or claim them without adequate documentation, creating risk if a return is ever reviewed. Keeping organized, contemporaneous records throughout the year, rather than trying to reconstruct expenses from memory at tax time, is a genuinely valuable habit that directly affects how much of hard-earned income is actually kept.

Balancing gig work with a traditional job

Many immigrants combine gig work with a traditional job, either to supplement income during a transition period or as an ongoing strategy for increasing overall earnings. Having a traditional job that withholds taxes opens an option gig-only workers don’t have: adjusting W-4 withholding at that job to cover the additional tax owed on gig income, rather than making separate quarterly estimated payments. This can simplify the tax situation considerably if that job’s withholding capacity is large enough to absorb the additional liability, and it’s worth discussing with a tax professional when managing both types of income simultaneously.

Retirement savings without an employer plan

One of the less obvious tradeoffs of gig work is the absence of an employer-sponsored retirement plan, which many traditional employees contribute to automatically through payroll deductions, sometimes with an employer match. Gig workers need to be more deliberate about retirement savings, since there’s no default mechanism nudging contributions along. Options like a traditional or Roth IRA, or a Solo 401(k) for gig workers with no employees, offer tax-advantaged ways to save for retirement despite not having access to an employer plan, though taking advantage of them requires actively setting up and funding an account rather than relying on automatic payroll deductions.

Health coverage considerations for gig workers

Without an employer-sponsored health plan, gig workers typically need to purchase individual health insurance directly, whether through a government marketplace, a private insurance⁠(opens in new window) provider, or in some cases through a professional association offering group coverage to members. Costs and options vary considerably by location and income, and some marketplace plans offer subsidies based on income that can make coverage considerably more affordable than the full sticker price might suggest.

In Summary

Gig work offers genuine flexibility, but the lack of automatic tax withholding and the unpredictability of week-to-week income mean it requires more deliberate financial planning than traditional employment. Setting aside money for taxes consistently, and building a buffer for slower periods, protects both personal stability and the ability to support a family relying on that income.

This publication is provided for general information purposes only and is not intended to cover all aspects of the topics discussed herein. This publication is not a substitute for seeking advice from an applicable specialist or professional. The content in this publication does not constitute legal, tax, or other professional advice from Remitly or any of its affiliates and should not be relied upon as such. While we strive to keep our posts up to date and accurate, we cannot represent, warrant, or otherwise guarantee that the content is accurate, complete, or up to date.