Instacart Shopper Taxes in South Dakota - 2025 Guide

Updated for 2025 (Filing 2024 Taxes)

Is Instacart Shopper income taxable in South Dakota?

Yes, your income as an Instacart shopper is taxable at the federal level. The IRS considers you a self-employed individual, meaning you operate as an independent contractor, not an employee. You'll report your Instacart earnings on Schedule C (Profit or Loss From Business) when you file your federal income tax return (Form 1040). This schedule allows you to deduct business expenses, reducing your taxable income.

Good news for South Dakota residents: South Dakota has no state income tax! This means you won't file a state income tax return or pay state income tax on your Instacart earnings. However, you are still responsible for federal income and self-employment taxes.

Top Tax Write-offs for Instacart Shoppers

• Mileage: This is often the biggest deduction. For 2024, the standard mileage rate is 67 cents per mile for business use. Keep a detailed log of all miles driven for Instacart shopping, including dates, destinations, and purpose. You can use apps to track this automatically.
• Phone Expenses: If you use your personal phone for Instacart (which is common), you can deduct the percentage of the phone bill that relates to your business use. For example, if 75% of your phone use is for Instacart, you can deduct 75% of your phone bill.
• Hot Bags & Shopping Equipment: The cost of insulated bags, shopping carts, or other equipment specifically used for Instacart shopping is deductible.
• Software & App Fees: Any fees you pay for apps or software that help you manage your Instacart business (e.g., mileage tracking apps, expense trackers) are deductible.

The 15.3% Self-Employment Tax Surprise

Because you're self-employed, you're responsible for both the employer and employee portions of Social Security and Medicare taxes. This combined tax is called Self-Employment Tax and is currently 15.3% (12.4% for Social Security up to the annual wage base, and 2.9% for Medicare). You'll calculate this on Schedule SE (Self-Employment Tax).

You only pay self-employment tax on profits exceeding $400. You do get to deduct one-half of your self-employment tax from your gross income, which helps reduce your overall tax liability.

Closing Tip for South Dakota Residents

While you benefit from no state income tax in South Dakota, diligent record-keeping is crucial for maximizing your federal deductions and accurately calculating your self-employment tax. Consider using accounting software or working with a tax professional to ensure you're compliant and taking advantage of all available tax benefits. Don't wait until tax season to organize your information – start now!