How do I file taxes for my side hustle?
<div class="user-question">How do taxes work if I made some money from a side hustle last year? Do I need to file anything?</div>
According to the 50/30/20 budget, 50% of your income is supposed to go towards needs like housing and groceries, 30% goes towards wants, and 20% goes towards savings. In this economy, though?
The rising cost of living has a lot of us out there side hustling.
If you're one of them, congrats on taking control of your own destiny! But don't forget - you'll also have to take control of your own taxes.
When you set up a side hustle, you're effectively self-employed. That doesn't necessarily mean you have to get all official and set up an LLC. But it does mean you'll have to file some extra paperwork before April 15.
Here's a rundown on the basics. If your situation is simple enough, you may be able to do this yourself. If things are more complicated, it's usually wise to hire a CPA to help out - especially for the first year.
Side hustle tax forms
Buckle up. You're about to go way beyond your basic 1040.
- Schedule C: This is the form where you'll report your side hustle income and your associated expenses.
- 1099: Did you bill a single business client more than $600 in 2025? If so, you should have received a 1099 from them. You'll include this income on Line 1 of your Schedule C. Be careful, though! Even if you're not issued a 1099, you still need to report all of your side hustle income on Line 1 - whether any individual client breached the $600-mark or not.
- Schedule 1: You'll input your side hustle income from Schedule C on this form. It will also ask you about a whole heap of other income types. Once you've completed Schedule 1, you'll carry over the total from Line 10 onto your 1040 form, Line 8.
These are the basics, but depending on your situation, you may have to file additional forms.
The actual taxes
When you file your taxes, there are two types you'll have to pay - income tax and FICA taxes.
FICA taxes go towards programs like Medicare and Social Security. When you work for an employer, they pay half of them. The other half is taken out of your paycheck throughout the year and sent to the federal government.
But you don't have an employer to go halfsies with. Instead, you'll have to account for the full amount of FICA taxes for your side hustle income when you file during tax season.
<div class="frich-tip">Frich tip: File your estimated quarterly taxes throughout the year to avoid extra penalties. This also reduces the amount you owe during tax season.</div>
What's deductible (and what's not)
FICA taxes are a bummer, but the good news is that you can effectively reduce your income (and therefore how much tax you owe) by deducting eligible business expenses. Just note that not everything is deductible.
These items are usually deductible:
- Home office space: If you have a dedicated portion of your home that you use exclusively for your side hustle, you can measure it off, compare it to the square footage of your entire home, and then prorate your housing costs accordingly as a deduction.
- Office supplies: All that money you spent at Staples to keep your side hustle afloat can be deducted from your taxes.
- Advertising: The cash you put into spreading the word can be deducted on your Schedule C.
These items are not:
- Clothing: In the vast majority of cases, clothing does not count as a business expense. Even if you buy a suit specifically for work, you could theoretically wear it outside of work, so it's a no-go. You'd have to get really niche to find a way around this. Maybe if you were a mascot and purchased a costume that you never wore outside of work settings, you could make the argument that this is a deductible business expense. But short of that extreme, just don't do it.
- Entertainment: Even if you're wooing clients, entertainment expenses haven't been tax-deductible since 2017.
- Charitable contributions: You don't put these on your Schedule C. A small portion may be tax-deductible elsewhere on your tax return as a personal deduction.
These items are deductible (sometimes):
- Mileage: You can't deduct the miles you drive from your home to various job sites. But you can deduct miles between two separate business locations.
- Meals: If you're on a long-distance trip for business purposes, or you're dining out with clients as a part of a business meeting, you can deduct up to 50% of your costs. But you can't deduct the whole meal, and you have to be careful with the circumstances.
- Health insurance premiums: If you purchase your own health insurance, you may be able to deduct a portion of the premiums you pay on your self-employment taxes. Most side hustlers won't qualify for this, as the rules are pretty strict. If you even have the option of getting health insurance through your W-2 job or through your spouse's employer, you don't qualify.
This is too much. Where do I get help?
If you're feeling overwhelmed, that's completely normal. Getting help is always a better idea than messing up and paying penalties later on.
You may be able to get a CPA to help if you have a simple Schedule C. If you've formed an LLC for your side hustle, you'll want to invest in an accountant. But guess what? Accountant fees are tax-deductible.
If you need something a little more free, taxpayers below a certain income threshold may qualify for in-person help with VITA volunteers. Just know that not all VITA volunteers are equally versed in Schedule C filings. You might luck out, or you might run into a well-meaning volunteer who inadvertently gives bad advice.
If you're feeling a bit more confident, you could also get free, non-personalized advice from tax software using the IRS's Free File program - assuming you're below the program's income limits. Be mindful as you use this system. Tax software companies are notorious for pushing you into a higher paid tier.
Make your paperwork prettier for next year
Tax season can be a breeze or a nightmare, depending on how organized you are. If you're keeping track of side hustle income and expenses, you can make the task easier by investing in a budgeting software that's powerful enough to categorize these expenses.
Once you get into the additional nuances of forming an LLC, you'll likely want to invest in professional accounting software like FreshBooks.
Found this valuable? Here are some more deep dives from the Frich team 🤝
✅ How to (Legally) Pay Less in Taxes
✅ How do I manage money as a freelancer?
✅ How do I make money as a freelancer?
Good luck!
Chloe Adams
