More Americans than ever are turning to the side hustle, from freelance design and consulting to ride-share driving, online sales, and digital content creation. That extra income can be exciting, but it comes with something less thrilling: tax responsibilities.
At Burke CPA and Advisors, we help side hustlers, freelancers, and small business owners navigate the rules so they can focus on growth—not IRS headaches. Let’s break down what you need to know about the tax side of your hustle.
What Counts as a Side Hustle for Tax Purposes
The IRS considers all income taxable, whether from your primary job or weekend gig. Side hustle income can include:
- Payments from freelance projects
- Rideshare or delivery driving
- Selling goods online
- Tutoring or consulting work
If you’re earning with the intent to make a profit, you’re likely considered self-employed. On the other hand, hobby income is treated differently and comes with limits on deductions.
Pro Tip: The IRS Hobby vs. Business guidelines can help determine your status.
The Three Main Types of Taxes You May Owe
When you have a side hustle, you’re responsible for paying taxes on the income you earn, often without an employer withholding them for you. For Example, if you earn $10,000 from your side hustle, self-employment tax alone could be about $1,530.
- Income Tax: Added to your total annual income and taxed at your regular rate.
- Self-Employment Tax: 15.3% total for Social Security and Medicare.
- State & Local Taxes: Varies by where you live and work.
How to Report Your Side Hustle Income
Even if you’re paid through Venmo, PayPal, or cash, it’s taxable. Keep a simple spreadsheet or use accounting software to track every payment and expense.
- Form 1099-NEC – Used when you’re paid $600 or more by a client.
- Form 1099-K – Issued by payment platforms when you meet certain thresholds.
- Cash & Digital Payments – You must still report them, even without a form.
Deductions and Expenses to Lower Your Tax Bill
Many of those with a side hustle pay more in taxes than necessary because they overlook deductions.
Common write-offs include:
- Home office expenses
- Mileage or vehicle expenses
- Business supplies and equipment
- Software subscriptions
- Professional fees (including your CPA!)
Be sure your deductions are legitimate and well-documented to avoid audit issues.
Planning Ahead to Avoid Surprises
One of the biggest shocks for those new to the side hustle is the size of their tax bill in April. Avoid the stress by:
- Making quarterly estimated tax payments.
- Setting aside 25–30% of your side hustle income for taxes.
- Using a CPA to help you project and manage your tax liability.
Final Thoughts
Earning extra income can be empowering, but taxes can eat into your hard work without proper planning. At Burke CPA and Advisors, we help those with a side hustle turn income into opportunity by managing tax obligations and maximizing deductions.
Ready to make your side hustle tax-smart? Schedule a consultation with a Burke Advisor today.