The majority, if not all info is taken from Axonium's guide to custom hats , so make sure to support it while youre at it, yes?

So to start things off, you will need an image editing program, obviously. PaintNET [www.getpaint.net] is best for this in my opinion, however GIMP [www.gimp.org] and Adobe Photoshop [www.adobe.com] should work fine too.
Microsoft paint will not work for this as it doesnt support transparency
So, now, you need one of these templates.
Use this one incase you want an original capeless custom hat and use this one if you want the one with a cape. Save the template and draw a hat over the duck and your version of a cape over the cape area if you got a cape version.

• Keep in mind that you need to remove the rest of the template when youre done with the hat, unless you want to end up with an akward model of a white duck instead of just a hat.
  
• Make sure to keep the background trasperent, else, similar to the first case you will end up with a giant white block of a hat.

The final step to your custom hat is Quackhead [penguinscode.github.io]. As of now, if im not mistaken quackhead is the only way to turn .png files into .hat files. Now, all you gotta do is click the "Add Team" and use the png file of a hat you created. At this point, you can eather "Extract it as a hat file" or "Extract it as a mod pack". Modpack will allow you to upload it to workshop, however, you cant really use modpacks in other people's games unless youre a host, so just use hat files instead, those are universal.
Now, once you have acquired the .hat file, you gotta drop it into your duck game folder. The directory should be (Wherever the core of your steam is,C:\Program Files (x86) by default)\Steam\steamapps\common\Duck Game. Just copy/move hat files into there and you're good to go. If you have created multiple hats, and they are in the zip folder, putting a zip file into duck game folder will not work, so just extract the files there.

Again, big shoutout to Axonium and his original guide