Side Hustle Taxes: What US Beginners Need to Know

Earning extra money from a side hustle is exciting, until tax time arrives. The good news: side hustle taxes aren’t complicated once you understand a few core ideas. This guide covers the basics for US side hustlers so nothing catches you off guard.

1. You’re (probably) self-employed

If you freelance, resell, run a blog or do gig work as an independent contractor, the IRS generally treats you as self-employed for that income. You report it on Schedule C (profit or loss from business) with your regular Form 1040.

2. Self-employment tax is separate from income tax

Employees split Social Security and Medicare taxes with their employer. When you’re self-employed, you pay both halves through self-employment tax: 15.3% of your net self-employment earnings (12.4% Social Security, up to an annual limit, plus 2.9% Medicare). It generally applies once your net earnings from self-employment reach $400 for the year, and it’s calculated on Schedule SE. That’s on top of regular income tax.

You can deduct half of your self-employment tax when calculating your income tax, which softens the blow a little.

3. You may need to pay quarterly

No employer is withholding tax from side hustle income, so the IRS generally expects you to pay as you go through quarterly estimated tax payments if you expect to owe $1,000 or more for the year. Payments are usually due around mid-April, mid-June, mid-September and mid-January.

If you also have a regular job, another option is to increase the tax withheld from your paycheck (by updating your W-4) to cover your side income.

4. How much should you set aside?

A common rule of thumb is to put 25–30% of your side hustle profit into a separate savings account for taxes. Your actual rate depends on your total income, deductions and state. Treat this as a starting point, not a calculation.

5. Tax forms you might receive

• Form 1099-NEC: from clients who paid you as a contractor
• Form 1099-K: from payment platforms and online marketplaces
• Form 1099-MISC: for some other types of payments

Reporting thresholds for these forms have changed in recent years, so don’t rely on whether you get one. Report all of your income either way.

6. Deduct legitimate business expenses

You’re taxed on profit (income minus allowable expenses), so tracking expenses saves real money. Expenses generally need to be ordinary and necessary for your business. Common examples:

• Software and subscriptions used for the business (hosting, design tools)
• Equipment used for the business, such as a microphone or shipping scale
• Inventory and shipping costs for resellers
• Platform and payment processing fees
• A home office, if part of your home is used regularly and exclusively for the business (specific rules apply)
• Business mileage (personal commuting doesn’t count)

7. Hobby or business?

If you’re doing something mainly for fun with no real profit motive, the IRS may treat it as a hobby. Hobby income is still taxable, but hobby expenses generally can’t be deducted. Running your side hustle like a business (keeping records, trying to profit) matters.

Your simple tax checklist

Make record-keeping easy with our guide to tracking side hustle income and expenses. Official information is available from the IRS’s Self-Employed Individuals Tax Center.

This article is general educational information about US federal taxes, not tax, legal or financial advice. Rules, thresholds and deadlines change, and state rules vary. Check IRS.gov and consider speaking with a qualified tax professional about your situation.