Do I Have to Pay Taxes on a Side Hustle? (2025)

Yes, you have to pay taxes on a side hustle once your net earnings from it reach $400 for the year. At that point you owe self-employment tax and must file a return, even if no client sends you a 1099 and even if the work is part-time. All side-hustle income is taxable whether or not you get a tax form. The good news is that only your net profit is taxed, so tracked business expenses and the 20% qualified business income deduction can lower the bill.

The $400 rule that catches people off guard

The IRS threshold for owing self-employment tax is low: $400 of net self-employment earnings in a year. Net means after business expenses. Clear $400 of profit driving for a rideshare app, selling on Etsy, freelancing, or walking dogs, and you are required to file a return and pay self-employment tax on it. This is separate from, and lower than, the income level at which you would owe regular income tax.

A lot of side hustlers assume they are fine under $600 because that is the number they have heard. That $600 was only ever a threshold for when a payer had to issue a form, not a threshold for when income becomes taxable. The two are unrelated. Your obligation to report and pay starts at $400 of net profit regardless of what paperwork lands in your mailbox.

Will I get a 1099-K for my side hustle in 2025?

Probably not, unless the side hustle is sizable. After several years of changing rules, the 1099-K threshold reverted for 2025. A payment platform like PayPal, Venmo for business, Etsy, or eBay now issues a Form 1099-K only when your gross payments exceed both $20,000 and 200 transactions in the year.

The trap is reading "no 1099-K" as "no tax." Not getting a form does not make the income tax-free. You are still required to report every dollar of profit. If you sell products or invoice clients, keeping clean records matters, and pulling the totals off each invoice into a simple spreadsheet makes it far easier to report the right number and back it up if the IRS asks.

What taxes does a side hustle actually owe?

Two, usually. First is self-employment tax, which covers Social Security and Medicare for people who work for themselves. The rate is 15.3%, made up of 12.4% Social Security and 2.9% Medicare, applied to 92.35% of your net earnings. The Social Security portion applies up to the 2025 wage base of $176,100 counting any W-2 wages you also have. You get to deduct one-half of your self-employment tax as an adjustment to income.

Second is regular income tax on the profit, at your marginal bracket, stacked on top of your day-job income. That stacking is why a side hustle can feel heavily taxed: the profit sits on top of your salary and is taxed at your highest rate, and it carries self-employment tax that a W-2 job does not. Our breakdown of how much tax you pay on 1099 income works through a full example.

Deductions shrink the taxable amount

Only net profit is taxed, so ordinary and necessary business expenses directly lower both your income tax and your self-employment tax. Common side-hustle deductions include:

• Supplies, materials, and inventory costs
• Software, apps, and subscriptions you use for the work
• Mileage for business driving, or actual vehicle costs
• A home-office deduction if you use part of your home regularly and exclusively for the hustle
• A share of your phone and internet used for the business
• Advertising, platform fees, and payment processing fees

On top of expenses, many self-employed people qualify for the qualified business income (QBI) deduction, worth up to 20% of net business income, subject to income limits. Between expenses and QBI, the amount actually taxed is often much smaller than gross receipts. The point is to track expenses all year, not reconstruct them in April. See our list of self-employed write-offs for more.

Quarterly taxes and setting money aside

Because no employer withholds tax from side-hustle income, the IRS expects you to pay as you go through quarterly estimated taxes on Form 1040-ES, generally due in April, June, September, and January. Skip them and you can owe an underpayment penalty even if you pay in full at filing. A widely used rule of thumb is to set aside 25% to 30% of net profit to cover combined self-employment and income tax, adjusting up if the side income lands you in a higher bracket.

If your side hustle is growing, treating it as a real business early pays off. TaxFile handles the self-employed return with Schedule C and Schedule SE, and gig worker taxes covers rideshare and delivery specifics.

Frequently asked questions

Do I have to report side-hustle income under $600?

Yes, if your net profit is $400 or more. The $600 figure only ever governed when a payer had to issue a form, not when income is taxable. You owe self-employment tax and must file once net self-employment earnings hit $400, regardless of whether you receive any 1099.

Do I have to report cash from a side hustle?

Yes. All income is taxable and reportable whether it arrives as cash, a check, a payment app transfer, or a direct deposit, and whether or not a form is issued. Cash income has the same reporting requirement as everything else; the only difference is that you are responsible for tracking it yourself.

How much should I set aside for side-hustle taxes?

A common rule of thumb is 25% to 30% of your net profit, which covers the 15.3% self-employment tax plus federal income tax at most middle-income brackets. Set aside more if the extra income pushes you into a higher bracket or if your state has an income tax. Use Form 1040-ES to estimate quarterly payments precisely.

Is my side hustle a business or a hobby?

If you run it to make a profit, it is a business: you report it on Schedule C, owe self-employment tax, and can deduct expenses. If it is not for profit, it is a hobby, and you must still report the income but cannot deduct expenses. The IRS weighs your profit motive, how businesslike your operation is, and your history of profit.

File your side hustle with TaxFile

TaxFile reads your 1099s and income records, builds your Schedule C and Schedule SE, finds the deductions and QBI you qualify for, and prepares your federal and state returns for review before filing. To plan quarterly payments, the quarterly tax calculator estimates what to send the IRS each period. This article is general information, not tax advice; for complex situations, consult a CPA or tax professional.