Tax season is here! For some, this process can be more complicated thanks to income earned on the side, otherwise known as side hustles.
Side hustles have become a vital source of income for many Americans. Whether it's freelancing, selling handmade goods, driving for rideshare services or running an online store, this extra income can be great for paying off debt, saving for a vacation or making headway towards any financial goal.
But with extra income comes extra tax responsibilities. As we step into 2025, side hustlers need to stay informed about tax laws, deductions and best practices to avoid unexpected surprises from the IRS.
If you're earning money from a side hustle, here's what you need to know about filing your taxes this year.
7 Things To Know About Taxes in 2025
1. You may need to pay quarterly taxes.
Unlike traditional employees who have taxes automatically withheld from their paychecks, side hustlers typically don't have taxes taken out of their earnings.
If you expect to owe more than $1,000 in taxes for the year, the IRS requires you to make estimated quarterly tax payments. These payments cover your income tax and self-employment tax (Social Security and Medicare).
The quarterly tax deadlines for 2025 are:
- April 15, 2025 (for income earned Jan. 1 – March 31)
- June 16, 2025 (for income earned April 1 – May 31)
- Sept. 16, 2025 (for income earned June 1 – Aug. 31)
- Jan. 15, 2026 (for income earned Sept. 1 – Dec. 31).
Failing to make these payments on time could result in penalties and interest charges. To estimate how much you owe each quarter, use IRS Form 1040-ES or consult a tax professional.
2. Self-employment tax applies to side hustles.
If you earn more than $400 from your side gig in 2025, you're required to file a tax return and pay self-employment tax, which is 15.3% of your net earnings. This covers Social Security (12.4%) and Medicare (2.9%).
The good news? You can deduct half of your self-employment tax when calculating your taxable income. This deduction helps lower your overall tax burden.
3. Keep track of deductible business expenses.
As a side hustler, you can reduce your taxable income by deducting eligible business expenses. Some common tax deductions include:
- Home office expenses (if you use a dedicated space for work)
- Internet and phone bills (if used for your business)
- Vehicle mileage (if you drive for business purposes)
- Supplies and equipment (laptops, software, tools, etc.)
- Marketing and advertising (social media ads, business cards or website fees)
- Professional services (accounting, legal or consulting fees).
To claim these deductions, keep detailed records of your expenses, including receipts, invoices and bank statements. Using accounting software or apps can help you track your income and expenses easily.
4. Understand new tax laws and adjustments for 2025.
Each year, tax laws evolve, and 2025 is no different. Here are a few key changes that could impact side hustlers.
Higher Standard Deduction
The IRS adjusts the standard deduction annually to account for inflation. In 2025, the standard deduction amounts are:
- $15,000 for single filers
- $30,000 for married couples filing jointly
- $22,500 for heads of households.
If your business expenses exceed these amounts, itemizing your deductions might be more beneficial.
Increased IRS Reporting for Payment Apps
If you receive payments through apps like Venmo, PayPal, Cash App or Zelle, the IRS requires these platforms to issue Form 1099-K if your total business transactions exceed $600 for the year. This means that even small side hustles could receive a tax form for earnings that were previously under the radar.
To avoid confusion, separate your business and personal transactions. Consider using a dedicated bank account for your side hustle.
5. Side hustle income may affect your tax bracket.
Your side hustle earnings are added to your total income, which could push you into a higher tax bracket. Understanding how tax brackets work can help you plan accordingly and set aside enough money for tax payments.
Here are the 2025 federal tax brackets for single filers:
- 10%: $0–$11,925
- 12%: $11,926–$48,475
- 22%: $48,476–$103,350
- 24%: $103,356–$197,300
- 32%: $197,300–$250,525
- 35%: $250,526–$626,350
- 37%: $626,351+.
If your side hustle income bumps you into a higher bracket, you may need to adjust your tax withholding at your full-time job or increase your estimated tax payments.
6. Retirement contributions can lower your tax bill.
One way to reduce your taxable income while securing your financial future is by contributing to a retirement plan. As a side hustler, you have several options:
- 401(k): The IRS allows individual contributions up to $23,500 for 2025
- SEP IRA: Contributions are capped at 25% of your net earnings or $70,000, whichever is lower
- Traditional IRA: Contributions up to $7,000 (or $8,000 if you're 50 or older) with tax-deferred growth.
These contributions can lower your taxable income, helping you save on taxes while preparing for retirement.
7. Consider working with a tax professional.
Taxes can be complicated—especially when juggling multiple income streams. A Certified Public Accountant (CPA) or tax professional can help you:
- Maximize deductions
- Ensure you're paying the correct estimated taxes
- File your tax return correctly and on time
- Avoid costly IRS penalties.
The investment in professional tax advice can often pay for itself in tax savings and peace of mind.
Make Tax Season Stress-Free With Apple Financial Services
Navigating taxes as a side hustler doesn't have to be overwhelming. By staying informed, tracking your income and expenses and planning ahead, you can minimize your tax burden and keep more of your hard-earned money.
Need guidance on managing your side hustle finances? Apple Financial Services is here to help. Our financial experts can assist with managing your wealth, planning for taxes and creating retirement savings strategies tailored to your needs. Contact us today to get started!
