Side Hustle Taxes: What You Owe on Extra Income and How to Lower It
Short answer
Income from a side hustle is taxable even if you never receive a tax form for it. If your net earnings from self-employment are $400 or more, you also owe self-employment tax of 15.3% on 92.35% of that profit, on top of income tax. You can deduct legitimate business expenses to reduce both, and you may need to make quarterly estimated payments to avoid an underpayment penalty.
Driving for a rideshare app, selling on Etsy or eBay, freelance design, weekend catering, tutoring, reselling sneakers: millions of people have income outside their main job. The tax rules are the same whether you earn $500 or $50,000 on the side. The difference is that nobody withholds tax from it, so it’s easy to end up with a surprise bill in April.
Rule #1: It’s taxable even without a form
The IRS is clear that income from side work must be reported even if it isn’t on an information return and even if it was paid in cash, goods, or digital currency. Payment apps and marketplaces generally issue an income statement only once you pass $20,000 and 200 transactions in a year. Falling under that line doesn’t make the income tax-free.
What isn’t income: money friends send you to split dinner, gifts, and reimbursements for shared expenses. Mark those payments as personal in the app to keep your records clean.
Rule #2: Two taxes, not one
| Tax | Applies to | Rate |
|---|---|---|
| Income tax | Your net side-hustle profit, added to your other income | Your regular federal, state, and (in NYC) city rates |
| Self-employment tax | 92.35% of net profit, if net earnings are $400 or more | 15.3% (12.4% Social Security + 2.9% Medicare) |
You can deduct half of the self-employment tax when figuring your adjusted gross income. More detail: do I have to pay self-employment tax?
Example: A weekend delivery driver in Brooklyn
Andre has a full-time job and delivers food on weekends. Side income: $14,000. Expenses: business mileage, phone, and insulated bags, totaling $5,000.
- Net profit: $14,000 − $5,000 = $9,000
- Self-employment tax: $9,000 × 92.35% × 15.3% = about $1,272
- Half of SE tax deducted from income: about $636
- Income tax: the remaining profit is taxed at his regular federal, NY State, and NYC rates
If he hadn’t tracked his $5,000 of expenses, his self-employment tax alone would have been about $707 higher.
Rule #3: Expenses lower both taxes
Ordinary and necessary costs of the side business reduce the profit that both taxes are based on. Common ones:
- Vehicle use: the standard mileage rate for 2026 is 72.5 cents per mile for January–June and 76 cents from July 1. Keep a log. See how to track mileage
- The business share of your phone and internet
- Supplies, inventory, shipping, and platform fees
- Software and subscriptions used for the work
- A home office used regularly and exclusively for the business. See home office rules
Platform fees are often taken out before you’re paid. Record the full sale and the fee separately; otherwise you understate both income and expenses.
Rule #4: Pay as you go
Because nothing is withheld, you may need to make quarterly estimated tax payments. The IRS generally expects them if you’ll owe $1,000 or more for the year. Due dates are April 15, June 15, September 15, and January 15. See quarterly estimated taxes.
Shortcut for people with a regular job: instead of quarterly payments, you can increase the withholding at your main job to cover the side income. Withholding is treated as paid evenly through the year, which can help you avoid the underpayment penalty.
A simple habit: move 25% to 30% of every side-hustle payment into a separate savings account. Adjust once you see your actual tax.
Rule #5: Keep simple records
- A separate bank account or card for side-hustle money
- A monthly total of income by platform or client
- Receipts for expenses, saved digitally
- A mileage log
Our bookkeeping guide for gig workers has a simple setup.
When a side hustle becomes a business
If your side income is growing, it may be time to think about structure, bookkeeping software, and separate accounts. See our freelance bookkeeping guide.
Earning on the side?
We’ll make sure your side income is reported correctly and every legitimate expense is counted.
Frequently asked questions
Do I have to report side hustle income if I didn’t get a tax form?
Yes. Income from part-time, temporary, or side work is taxable even if it isn’t reported to you on any form, and even if you were paid in cash, goods, or digital currency.
When do payment apps send a tax form?
Payment apps and online marketplaces generally send an income statement only if you receive more than $20,000 across more than 200 transactions in a year. Your income is taxable either way.
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