Side Hustle Taxes: What You Need to Know About Reporting Extra Income
A plain-English guide to side hustle taxes in the U.S., including when gig and freelance income must be reported, self-employment tax, 1099 forms, quarterly estimated taxes, deductions you may be able to claim and simple record-keeping habits.
Maybe you drive for a rideshare app on weekends, sell vintage clothes online, walk dogs, tutor, edit videos, make candles or take freelance design gigs. Side hustles have become a normal part of life for millions of people, whether to cover rising costs, pay down debt or turn a passion into extra income.
What often comes as a shock is tax time. Many people don't realize that side income comes with tax responsibilities that are different from a regular paycheck. Nobody withholds taxes for you, and there's an extra tax most first-timers have never heard of. Getting it wrong can mean a surprise bill, penalties and a lot of stress. Here's what you need to know, in plain English.
This article is general information for U.S. taxpayers, not tax advice. Tax rules change, so check IRS.gov or talk to a qualified tax professional about your situation.
Do you have to pay taxes on side hustle income?
In short, yes. The IRS considers income from side hustles, gig work, freelancing and selling goods for profit to be taxable income, whether or not you receive a tax form for it. That includes payments through apps, cash and money transfers.
There are a few important thresholds:
- Self-employment tax: If your net earnings from self-employment are $400 or more in a year, you generally need to file a tax return and pay self-employment tax.
- Income tax: Your side income is added to your other income and taxed at your regular income tax rate.
Selling personal items for less than you paid, like an old couch or used clothes, usually isn't taxable income, because you didn't make a profit. Keep records just in case.
What is self-employment tax?
When you work for an employer, Social Security and Medicare taxes are taken out of your paycheck, and your employer pays a matching share. When you're self-employed, you pay both halves yourself. That's called self-employment tax.
The self-employment tax rate is 15.3 percent, made up of:
- 12.4 percent for Social Security (on earnings up to an annual limit)
- 2.9 percent for Medicare
The good news: self-employment tax is calculated on your net earnings, meaning income minus business expenses. And you can deduct half of your self-employment tax when calculating your income tax.
Tax forms you might receive
Form 1099-NEC
If a client or business pays you $600 or more in a year for services, they're generally required to send you a 1099-NEC. That threshold is scheduled to rise for payments made in 2026 and later, so check IRS.gov for the current figure.
Form 1099-K
Payment apps and online marketplaces may send a 1099-K reporting payments you received for goods and services. The reporting thresholds for this form have changed several times in recent years. Whether or not you get one, the income is still taxable.
No form at all
If you don't receive a form, you're still required to report your income. Keep your own records.
Quarterly estimated taxes
Because no taxes are withheld from side hustle income, the IRS generally expects you to pay taxes throughout the year through quarterly estimated payments if you expect to owe $1,000 or more for the year.
Estimated payments are usually due around:
- April 15 (for income earned January through March)
- June 15 (April and May)
- September 15 (June through August)
- January 15 of the following year (September through December)
If you also have a regular job, another option is to increase your paycheck withholding by updating your W-4 with your employer, which can help cover the extra tax.
Missing estimated payments can lead to penalties and interest. The IRS has a free Tax Withholding Estimator and Form 1040-ES instructions to help you figure out how much to pay.
How much should you set aside?
A common rule of thumb is to set aside 25 to 30 percent of your side hustle profit for taxes. The exact amount depends on your income, deductions and state taxes. Keeping this money in a separate high-yield savings account means it's ready when you need it, and earns a little interest meanwhile.
Deductions you may be able to claim
You can usually deduct "ordinary and necessary" business expenses, which lowers your taxable profit. Common examples include:
- Supplies and materials for your work
- Equipment, like a laptop, camera or tools, used for your business
- Software and subscriptions used for work
- Mileage for business driving, using the IRS standard mileage rate or actual expenses
- Home office, if you use part of your home regularly and exclusively for business
- Phone and internet, the business-use portion
- Platform and transaction fees
- Advertising and marketing
- Professional services, like accounting
- Education that maintains or improves skills for your current business
Only deduct the portion used for business, and keep receipts.
Record-keeping made simple
Good records make tax time much less stressful:
- Open a separate bank account for your side hustle. It makes tracking income and expenses far easier.
- Track income from every source, including cash and app payments.
- Save receipts for expenses. A photo in a dedicated folder works.
- Log mileage with an app or notebook, including date, purpose and miles.
- Review monthly. Spend 15 minutes updating your records.
Some people use spreadsheets; others use bookkeeping apps. Our guide to using AI for budgeting also covers ways AI can help you organize records, just don't share sensitive information.
How to report side hustle income
Most side hustlers report income and expenses on Schedule C (Profit or Loss from Business), which is attached to your regular Form 1040. You'll also use Schedule SE to calculate self-employment tax.
Free help is available:
- IRS Free File for eligible taxpayers
- Volunteer Income Tax Assistance (VITA) for people who qualify based on income
- Low-cost tax preparers and CPAs for more complex situations
State and local taxes
Don't forget state income tax, which varies by state. Some cities also have local income taxes or require business licenses. Check your state's tax agency website.
Side hustle money and your bigger financial picture
Extra income is a great tool. To make the most of it:
- Set aside taxes first
- Build or boost your emergency fund
- Pay down high-interest debt with the debt snowball or avalanche
- Consider retirement savings. Self-employed people may be able to open accounts like a SEP IRA or solo 401(k).
Avoiding side hustle burnout
Side hustles can be rewarding, but working a full-time job plus extra gigs can wear you down. Protect your rest, set limits on how many hours you work, and check in with yourself regularly. Our guides to burnout signs and recovery and work-life boundaries can help.
A simple side hustle tax checklist
- Open a separate account for side income
- Save 25 to 30 percent of profits for taxes
- Track income from every platform and client
- Save receipts and log business mileage
- Mark quarterly estimated tax dates on your calendar
- Review your records monthly
- Get help from IRS Free File, VITA or a tax professional if you're unsure
Frequently asked questions
Do I have to report side hustle income if it's small?
Generally, yes. All income is taxable, and if you have net self-employment earnings of $400 or more, you usually need to file and pay self-employment tax.
How much should I save for taxes on a side hustle?
A common guideline is 25 to 30 percent of your profit, but it depends on your income, deductions and state taxes.
Do I have to pay quarterly taxes on side income?
If you expect to owe $1,000 or more in tax for the year, the IRS generally expects quarterly estimated payments or increased withholding from your regular job.
What can I deduct from my side hustle?
Ordinary and necessary business expenses, such as supplies, equipment, software, business mileage, platform fees and the business portion of your phone and internet.
Do I need to report income if I didn't get a 1099?
Yes. You're required to report all taxable income whether or not you receive a tax form.
Extra income is easier to enjoy without tax surprises. See how your financial wellness compares with the rest of the wheel in our free wellness wheel quiz.
