Side Hustle Taxes 101: A Guide for Gig Workers
Earning extra income through freelancing, driving rideshare, or selling products online is a fantastic way to boost your savings. However, many gig workers forget that side hustle income is not tax-free. If you earn more than $400 from your side hustle, you are legally considered a self-employed business owner by the IRS.
The Realities of Self-Employment Tax
When you work a traditional job, your employer pays half of your Social Security and Medicare taxes. When you work for yourself, you must pay both halves. This is known as the Self-Employment Tax, and it sits at a flat 15.3% on top of your standard income tax rate.
Maximizing Your Write-Offs
The best way to lower your self-employment tax bill is to track and claim every legitimate business deduction.
Vehicle Expenses: Track your exact business mileage when driving for work, or log actual expenses like gas, oil changes, and insurance.
Equipment and Software: Deduct computers, subscription tools, or raw materials used specifically to generate your side income.
Communication Costs: Claim a prorated portion of your cell phone and internet bills based on how much you use them for your side hustle.
Failing to plan for side hustle taxes can lead to an expensive surprise when you file. Contact us today to estimate your current self-employment liabilities and set aside the right amount of tax reserves each month.
