Everyone should have a hobby or some sort of talent/skill that extends beyond their typical 9-to-5, and if you’re good at it…you shouldn’t be doing it for FREE.
If you have a side hustle, congratulations—you’re already on the path to financial freedom and building wealth! Driving Uber, selling on Etsy, freelancing online, or running a weekend business, are all great side hustles to have.
But, like anything else, if you’re not managing your side gig correctly, you could be losing money to taxes and missing out on key deductions.
In this guide, we’ll lay out and maximize your earnings, legally pay less in taxes, and turn your side gig into something bigger.
Why a Side Hustle is More Than Just Extra Cash
Over 50% of working Americans now have a side hustle. Why? Because:
✅ It helps pay off debt faster.
✅ It provides a safety net during uncertain times.
✅ It can eventually replace your 9-to-5 job if you scale it right.
The problem? Many people are leaving thousands of dollars on the table by not structuring their hustle correctly or taking advantage of tax-saving strategies.
Understanding Self-Employment Tax (And How to Reduce It!)
Here’s what most side hustlers don’t realize: the IRS considers you a business owner. That means you’re subject to self-employment tax (SE tax) at 15.3% on your net earnings. This covers Social Security and Medicare—just like when you’re a W-2 employee, except now you pay both the employer and employee share.
Example: If you make $10,000 from your side hustle, you’ll owe around $1,530 in self-employment taxes before income tax. Ouch.
How to Reduce Your Self-Employment Tax:
✅ Write Off Business Expenses – The more expenses you legally deduct, the lower your taxable income.
✅ Use an LLC When Necessary – While an LLC doesn’t save taxes by itself, it does provide liability protection.
✅ Graduate to an S Corp – If your side hustle nets over $40,000 per year, converting to an S Corporation can help you reduce self-employment tax significantly.
Must-Know Tax Deductions for Side Hustlers
One of the biggest perks of having a side hustle? The Write-offs! The IRS allows you to deduct any expense related to making money in your business.
Here are essential deductions every side hustler should track:
✅ Home Office Deduction – If you use a dedicated space at home for work, you can deduct up to $1,500 per year.
✅ Mileage & Auto Expenses – Driving for business? Write off 65.5 cents per mile in 2024.
✅ Cell Phone & Internet – If you use them for work, a portion is deductible.
✅ Equipment & Supplies – Laptops, cameras, tripods, lighting, and software count.
✅ Dining & Travel – Business meals are 50% deductible, and travel (flights, hotels, Uber, etc.) is 100% deductible.
✅ Hiring Your Kids – If you pay your child under 18 years old, they don’t pay taxes on wages up to $13,850 (2024).
Pro Tip: Always keep a separate business bank account for your side hustle. This makes tracking expenses easier and ensures you don’t miss valuable deductions!
When to Turn Your Side Hustle Into a Business
If you’re making $20,000+ per year from your side hustle, it’s time to think long-term:
Is your income growing?
Do you want to scale and hire others?
Are you paying too much in taxes?
At this stage, it may be smart to form an LLC (for liability protection) and eventually elect S Corp status to reduce your tax burden. If you’re serious about building wealth, structuring your business properly is key.
Final Thoughts: Your Side Hustle is Your Future
Whether you’re just starting out or looking to scale, your side hustle is more than just a paycheck—it’s a lucrative opportunity. Who knows, if things go well enough, you can turn your side hustle into your main hustle.
With smart tax planning, expense tracking, and the right business structure, you can keep more of what you earn and set yourself up for long-term success.
Take the Next Step
Tired of watching your side hustle profits disappear to taxes? You’re not alone. The good news? There are proven tax strategies that can help you cut your tax bill, keep more of your hard-earned money, and build long-term wealth.
Download our FREE Tax Guide to uncover tips, tricks, hidden deductions, and 30+ tax-saving secrets you can implement right now.
CPAs, EAs, Brokers, Attorneys, and Financial Planners, listen up! If you’re looking to take your practice to the next level, become a Main Street Certified Advisor and help your clients navigate the tax game like a pro—while adding more value to your business.
Call us at 520-800-0986 or book your FREE Discovery Call with our supportive team today!
