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Using Business Expenses To Lower Side Hustle Taxes

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What are side hustle taxes?

Starting a side hustle is a great way to make some extra cash. As they start to become more common, and the gig economy grows, the question on everyone’s minds is “Do you have to pay taxes on side hustles?” The answer is yes, you probably do. Maybe you started working as an Uber driver or selling custom keychains on Depop to supplement your W-2 income. The IRS considers anyone who has a side hustle to be “self-employed.” From a tax standpoint, this means paying another 15.3% in self-employment taxes on top of the federal income tax. Before you start to spiral, take a moment to remember that you only have to pay taxes on your side hustle if you have a net income of $400 or more in a year. And, if you do have to pay that 15.3%, half of it is deductible – more on that later. First, let’s talk about gross income. This will be shown on Form 1099, which you will receive from every entity that you worked for. Every independent contractor, freelancer, gig worker and self-employed individual should receive this form by the end of January. And what is your net income? Also called Adjusted Gross Income (AGI), this is your taxable income for the year after deducting tax write-offs from your gross income. You can use a self-employed income tax calculator to help you figure this out. You will need all this information when you file Form 1040.
Key takeaways:
  • You have to pay self-employment tax on side hustles if you make $400 or more in net income.
  • You should receive any 1099 forms coming to you by the last day of January.
  • You can write-off business expenses as tax deductions to lower your side hustle tax bill.

Table of contents

How to pay taxes on a side hustle?...Read more

How much tax will I have to pay on my side business?...Read more

How to pay taxes on a side hustle?

Just like income from any other source, self-employed individuals have to pay taxes on their side hustle income by the April 15 deadline (or the next working day if it is a weekend or public holiday). So if you were thinking about how to avoid paying taxes on your side jobs, I’m afraid there’s no way out. One exception to this, as we mentioned earlier, is if your net income is under $400. If you're still struggling with your taxes, use a self-employment tax calculator to get a clear breakdown on how much you owe the IRS. When you’re filing taxes for a side hustle, you will report all your income and business expenses on your Schedule C. To find industry specific tax write-offs you can claim and reduce your side hustle tax by using a 1099 tax calculator. You will then use Schedule SE to calculate your self-employment tax. That 15.3% includes Social Security tax (12.4%) and Medicare tax (2.9%). As our tax system works on a “pay as you go” basis, you might need to make estimated quarterly tax payments if you think you will pay over $1,000 in income tax. If doing these calculations seems confusing, you can use a quarterly tax calculator to do the math for you. When paying taxes every quarter, you will use Form 1040-ES. If you missed a quarterly tax deadline, use a tax penalty calculator to calculate your tax liability.
A guide on reporting side hustle income for self-employed individuals, freelancers, and those receiving 1099 forms. Includes tracking income and expenses, calculating estimated quarterly taxes, and filing tax returns using Form 1040, Schedule C, Schedule SE, and Form 1040-ES.

How much tax will I have to pay on my side business?

You can’t avoid paying taxes on your side jobs but you can lower your side hustle taxes. How? With the help of tax deductions. For example, an Uber driver can claim any "ordinary and necessary" expenses like tolls, tool kits, first aid kits and business licenses as itemized deductions on their indepedent contractor taxes. If you're also paying federal income tax, you can lower it by claiming the standard deduction available to all taxpayers based on their filing status. But for self-employment taxes, claiming all your itemized deductions is your best bet to pay as little as possible.
Image explaining itemized deductions for tax write-offs. Includes definition, criteria, and reporting on Schedule C. Relevant for self-employed, 1099, and freelance taxes.
Suppose you started photographing weddings as a side hustle to help pay off your loans quicker. You decided to invest in some rain protection gear for your camera and lens so that the weather doesn't affect your job. That gear counts as a business expense that is essential to making you money and hence can be “written off” as a tax deduction. This will reduce your net income and will get you a lower tax amount. You can do this for a variety of expenses like business meals, car mileage, hotel accommodation, and even laundry and dry cleaning expenses. If you're a delivery driver or just use your vehicle to meet clients and/or run work-related errands, you also write off car depreciation. To do this, you will have to keep an extremely close eye on your expenses and save all your receipts all throughout the year. If that sounds like a nightmare, let FlyFin's A.I. automatically analyze your expenses to find every deduction that you can take advantage of just by linking your expenses, FlyFin is specifically tailored for self-employed individuals and have CPAs who are experts in 1099 taxes who you can reach out to 24/7 to ask questions or ask to prepare and file your tax returns for you. Another alternative method to decrease taxable income is open an Individual Retirement Account (IRA). The IRS allows self-employed individuals to contribute up to 25% of their earnings to their pension, and this money can earn interest completely tax-free while it is in the account. Managing a side hustle while working a full-time job can take up a lot of your time. To avoid that yearly (or quarterly) tax season panic, make sure to track your expenses and have all your information ready to file as soon as you can. If you’re missing any 1099s, reach out to the entity that paid you to get one, so you can know what they reported to the IRS, and you can get your taxes done accurately and don’t miss the deadline.

Depreciation Tax Deduction

The depreciation tax deduction can be claimed for any asset that is used for business. There are three methods to calculate this deduction.

Education Expenses Tax Deductible

Education expenses are tax-deductible for self-employed individuals as long as they are related to their current job. Report the deductions on Schedule C.

Internet Bill Tax Deduction

For many who work from home, the internet is necessary for doing business. For some people, their internet bill counts as a tax write-off.

Write Off Your Car Payments

There are many tax deductions you can take related to your car, if you use it for work, but unfortunately your car loan payment isn't one of them.

Home Office Deduction

How the home office deduction saves self-employed individuals and freelancers on their taxes.

Home Improvement Deduction

What qualifies as a home improvement tax deduction and how homeowners who are self-employed or freelancers can benefit most.

Travel Expense Deduction

If you travel for work as a freelancer, there are a number of travel expenses you can claim as tax deductions in 2024 – find the details here.

Food and Entertainment Deduction

For 2024, you can deduct 50% of the cost of business meals as tax deductible – but not every meal can be deducted. This is relevant to self-employed people.

Car depreciation tax

Here's how to take advantage of depreciation, one of the biggest tax deductions people who use their car for work can take.

Car tax write off

Many freelancers drive their own vehicle for business and may qualify for certain car and mileage tax deductions.

Moving expenses deduction

Until recently, you could deduct moving expenses on your tax return. Recent changes to the tax rules have impacted whether you can deduct moving expenses.

Simplified home office deduction

If you use space in your home as an office for your business, you can take either the actual home office deduction or the simplified home office deduction.

Rent Tax Deduction

If you're self-employed, there are few ways you can write off your rent, and if you know how to use them, they can be among the most important ways to save money on taxes each year.

Mileage Tax Deduction

Get a car mileage tax deduction using either the standard mileage deduction or actual expenses deduction. You will report this on Schedule C.

Cell Phone Tax Deduction

A cell phone tax deduction is available to self-employed individuals if it is used for their business. They can also write off their internet usage.

Business And Consultant Tax Deduction

Consultant tax write-offs are useful in lowering self-employment taxes. Sole proprietors can use a QBID to lower taxable income, as they are a pass-through business entity.

Is Credit Card Interest Tax Deductible?

Credit card interest is tax-deductible if it is from a business-related purchase. You can write off a portion of the interest even on a personal credit card if it comes from a business expense.

Are Office Expenses Deductible?

The home office tax deduction is used to write off your home office and office-related expenses. Claim it using the standard or simplified method.

Advertising And Marketing Expenses Deduction

Marketing tax deductions related to promoting a business can be claimed by self-employed individuals. Report them on Schedule C.

Business Startup Costs and Deductions

Business startup costs can be amortized over 15 years. You can also deduct up to $5,000 in the first year if total costs are below $50,000.

Vehicle Write Off For Business

Vehicles used for business can be a tax write-off in 2024. You can claim this deduction even if you lease your vehicle under the actual expenses method.

Are Subscriptions Tax Deductible?

Subscriptions are tax deductible for self-employed individuals. You can write off the business use percentage as a tax deduction on Schedule C.

Depreciation Tax Deduction

The depreciation tax deduction can be claimed for any asset that is used for business. There are three methods to calculate this deduction.

Education Expenses Tax Deductible

Education expenses are tax-deductible for self-employed individuals as long as they are related to their current job. Report the deductions on Schedule C.

Internet Bill Tax Deduction

For many who work from home, the internet is necessary for doing business. For some people, their internet bill counts as a tax write-off.

Write Off Your Car Payments

There are many tax deductions you can take related to your car, if you use it for work, but unfortunately your car loan payment isn't one of them.

What’s FlyFin?

FlyFin caters to the tax needs of freelancers, gig workers, independent contractors and sole proprietors. It offers a host of cutting-edge tax tools that help you quickly find deductions. You can also use tools like a home office deduction calculator. FlyFin uses an A.I. to track all your business expenses automatically and find every possible tax deduction. Once you have all your possible deductions in one place, our CPA team files a guaranteed 100% accurate tax return for you. It saves you a couple of thousand dollars and a ton of time on your taxes. Download the app and have your taxes filed in minutes, saving time and more money on your taxes than last year, guaranteed.
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