Instacart Shopper Taxes in Kentucky - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Essentials for Instacart Shoppers in Kentucky

Navigating the Bluegrass State as an Instacart shopper offers flexibility, but it also comes with tax responsibilities. As an independent contractor, earnings from Instacart are considered self-employment income, requiring careful attention to both federal and Kentucky state tax regulations.

The IRS requires all self-employed individuals, including Instacart shoppers, to report their income and pay taxes. This is typically done using Schedule C (Profit or Loss from Business) when filing Form 1040. Furthermore, earnings exceeding $400 necessitate the payment of self-employment taxes, covering both Social Security and Medicare contributions, which are not automatically withheld from your Instacart payouts.

How Kentucky Handles Gig Worker Taxes

As a resident of Kentucky, a state income tax return is required, even if no Kentucky income tax was withheld. Kentucky operates under a flat income tax rate, currently at 4.0% for the 2025 tax year. This means all taxable income is taxed at the same rate. Instacart shoppers will report their self-employment income on Kentucky Form 740-NP, Nonresident/Part-Year Resident Income Tax Return, even if a full-year Kentucky resident. This form is used to calculate the Kentucky tax liability on business income. Kentucky also allows for a deduction for the federal income tax paid, which can help reduce your state tax burden. It's important to note that Kentucky conforms to many federal tax provisions, but it's crucial to stay updated on any differences. Kentucky’s Department of Revenue provides detailed information and resources for self-employed individuals; you can find more information at the Kentucky Department of Revenue website. Estimated tax payments may be required throughout the year if your tax liability is expected to be $500 or more. Failing to make these payments could result in penalties.

Top Tax Deductions for Kentucky Drivers

• Standard Mileage: The most popular deduction for Instacart shoppers. For the 2025 tax year, the standard mileage rate is 70 cents per mile. Given Kentucky’s relatively moderate gas prices, the standard mileage rate is likely to be a beneficial option for most drivers.
• Tolls & Parking: Kentucky has some toll roads, particularly around Louisville. Keep accurate records of all toll expenses and parking fees incurred while actively shopping or delivering for Instacart.
• Phone & Data Plan: If you use your personal phone for Instacart, you can deduct the percentage of your monthly bill that corresponds to business use. Maintain a log of the time spent using your phone for work-related activities.
• Vehicle-Related Costs: Expenses like car washes, phone mounts, insulated bags (hot bags/coolers), and dash cams used specifically for Instacart deliveries are deductible.

Key Warning: You cannot deduct both the standard mileage rate and actual car expenses (like gas, oil changes, repairs, insurance) in the same tax year. Choose the method that yields the larger deduction.

Understanding the 15.3% Self-Employment Tax

The 15.3% self-employment tax comprises two components: 12.4% for Social Security and 2.9% for Medicare. Unlike traditional employment, Instacart and other gig platforms do not withhold these taxes from your earnings. Therefore, it’s your responsibility to calculate and pay this tax, typically through estimated tax payments made quarterly to the IRS. This ensures you avoid penalties at tax time.