Instacart Shopper Taxes in South Dakota - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Essentials for Instacart Shoppers in South Dakota

Navigating the wide-open roads of South Dakota as an Instacart shopper offers flexibility, but also brings tax responsibilities. As an independent contractor, earnings from Instacart are considered self-employment income, requiring careful attention during tax season.

The IRS requires all self-employed individuals, including Instacart shoppers, to report their income and pay taxes. This is done using Schedule C (Profit or Loss from Business) when filing your federal income tax return (Form 1040). Crucially, this income is also subject to self-employment tax, which covers both Social Security and Medicare taxes – taxes that are typically withheld from a regular paycheck but are the responsibility of the independent contractor.

How South Dakota Handles Gig Worker Taxes

South Dakota stands out as one of the few states with no state income tax. This means Instacart shoppers won’t need to file a state income tax return or pay state income tax on their earnings. However, this does not exempt you from federal income tax or self-employment tax obligations. The lack of state income tax can be a significant benefit, allowing shoppers to retain a larger portion of their earnings. However, it also means that federal tax planning becomes even more critical. Many South Dakota residents, particularly those in growing cities like Sioux Falls and Rapid City, rely on gig work for supplemental income, and understanding the federal implications is paramount. The state does collect sales tax, which Instacart generally handles on behalf of the shopper, but it's important to keep accurate records of your earnings for federal reporting. South Dakota's relatively low cost of living, combined with the absence of state income tax, can make gig work an attractive option, but responsible tax management is essential for long-term financial health. For more information on South Dakota tax laws and resources, please visit the South Dakota Department of Revenue: https://dor.sd.gov/

Top Tax Deductions for South Dakota Drivers

• Standard Mileage: The most popular and often simplest deduction. For the 2025 tax year, the standard mileage rate is 70 cents per mile. Given South Dakota’s vast distances and reliance on personal vehicles, this deduction can significantly reduce your tax liability.
• Tolls & Parking: While South Dakota doesn’t have extensive toll roads, any tolls incurred while making deliveries, as well as parking fees directly related to Instacart shopping, are deductible.
• Phone & Data Plan: If you use your personal phone for Instacart shopping (which is common), you can deduct the percentage of your monthly bill that corresponds to business use. Keep a log of the time spent shopping to accurately calculate this percentage.
• Vehicle-Related Costs: Expenses like car washes to maintain a professional appearance, phone mounts for safe navigation, insulated hot bags, and even hand sanitizer are deductible as business expenses.

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

Understanding the 15.3% Self-Employment Tax

Self-employment tax is a combined tax for Social Security and Medicare. As an Instacart shopper, no taxes are automatically withheld for these programs. Therefore, you are responsible for paying the full 15.3% on your net earnings (income after deductions) exceeding $400. This is a significant tax obligation, so it’s crucial to plan accordingly and potentially make estimated tax payments throughout the year to avoid penalties.