Side Hustle Taxes 2025: What You Need to Know About Reporting Extra Income

A Complete Guide for Freelancers, Gig Workers, and Side Hustlers

Side hustles are no longer just a trend—they’ve become a way of life for millions of Americans. Whether you’re freelancing, driving rideshare, delivering food, selling online, or offering professional services, side income can make a big difference in your financial health. But here’s the catch: the IRS expects you to report every dollar you earn, even from side gigs.

Failing to properly report side hustle income can lead to penalties, unexpected tax bills, and IRS scrutiny. In this blog, we’ll cover what counts as taxable income, which forms you’ll need, what deductions you can take, and how to stay compliant.

Do You Have to Pay Taxes on a Side Hustle?

The short answer: Yes.

No matter how you earn—whether from freelancing, contract work, gig apps like Uber, or selling products online—you must report all income to the IRS. Even if you’re paid in cash or through apps like PayPal or Venmo, the IRS considers it taxable income.

📌 Key point: Every dollar counts. Not reporting side hustle income could result in IRS penalties or audits.

👉 Learn more about reporting income directly from the IRS self-employment guidance.

How to Report Side Hustle Income

When you have a side hustle, you’re considered self-employed. That means your earnings are treated as business income. Here’s how to report it:

• Schedule C (Form 1040): This form is used to report your profit or loss from your side hustle. You’ll include income from Forms 1099-NEC, 1099-K, or any other payments received.
• Schedule SE: If you earned more than $400, you must file this form to pay self-employment taxes, which cover Social Security and Medicare contributions.

💡 Tip: Even if you didn’t receive a 1099 form, you must still report the income. It’s your responsibility to keep accurate records.

What If You Have Multiple W-2 Jobs?

Some side hustlers also juggle traditional jobs. If you receive more than one W-2 form, you must include them all when filing your tax return.

One issue to watch for is Social Security tax overpayment. Employers stop withholding Social Security taxes once you reach the annual wage limit (over $160,000 in 2025). If you work for multiple employers and exceed this limit, you may need to claim a refund for the excess.

Side Hustle Deductions You Can Claim

The good news: side hustlers can reduce taxable income by claiming business deductions. These lower your overall tax bill by subtracting qualified expenses from your earnings.

Common deductions include:

• Tools, equipment, and materials.
• Home office expenses.
• Business-related travel and vehicle mileage.
• Training or professional development.
• A portion of internet or phone bills used for work.

📌 Pro Tip: Keep receipts and maintain accurate records. The IRS requires documentation to back up your deductions.

For detailed IRS guidance, review the IRS Schedule C Instructions.

What If You Don’t Report Side Hustle Income?

Not reporting your side income can lead to:

• Accuracy-related penalties.
• IRS audits.
• Additional interest and fines.

The IRS increasingly uses digital tracking (like third-party payment platforms) to monitor side gig earnings. With more oversight than ever, failing to report your income isn’t worth the risk.

How Side Hustlers Can Stay Organized

1. Track All Income: Use spreadsheets, accounting apps, or bookkeeping software.
2. Separate Accounts: Open a dedicated bank account for your side hustle.
3. Save for Taxes: Set aside 25–30% of your income to cover taxes.
4. Work With a Tax Pro: A professional can help maximize deductions and ensure compliance.

When to Seek Professional Help

Tax rules for side hustlers can get complex—especially if you juggle multiple jobs, earn over $400, or claim several deductions. That’s where professional guidance comes in.

At Resoly, we specialize in helping freelancers, independent contractors, and small business owners manage tax compliance, set up payment plans with the IRS, and explore relief options if you’re struggling with tax debt.

Key Takeaways

• All income is taxable. Whether through cash, apps, or checks, side hustle income must be reported.
• Know your forms. Most side hustlers will file Schedule C and Schedule SE.
• Deduct expenses. Track tools, home office costs, and mileage to reduce taxable income.
• Stay compliant. Keeping good records protects you from IRS penalties and audits.

Take Control of Your Side Hustle Taxes with Resoly

Side hustles can provide freedom and extra income—but they also add complexity at tax time. Don’t risk IRS penalties or missed deductions. Ready to stay compliant and reduce stress? Contact Resoly today for expert tax relief and side hustle tax planning. Learn more about self-employment taxes from the IRS👉 Explore side hustle tax support at Resoly.com