This lesson is general education about U.S. personal finance, not financial, tax or investment advice. Tax rules and limits change every year; check IRS.gov or a qualified professional for your situation.
What you’ll learn
- Side income is taxable whether or not you receive a 1099 form.
- Net self-employment earnings of $400 or more are subject to self-employment tax of 15.3%.
- Quarterly estimated payments, or extra withholding at a main job, help you avoid a penalty.
- Business expenses reduce your profit, so keep records and receipts.
A side gig changes how your taxes work in one important way: no employer is taking tax out of the money as you earn it. Planning for that is the whole skill.
All of it counts
Income from freelancing, ride-share and delivery apps, selling crafts, tutoring and online reselling is taxable, even if you’re never sent a form. The forms are only reporting tools:
- 1099-NEC: a business that paid you for services sends one if it paid you at least $2,000 in 2026, up from $600 in earlier years.
- 1099-K: payment processors and apps send one if you received more than $20,000 and had more than 200 transactions.
Payments from friends and family for personal reasons, such as splitting a dinner bill, aren’t business income.
Self-employment tax
Employees split Social Security and Medicare with their employer. When you work for yourself, you pay both halves, as self-employment tax of 15.3%, on net earnings of $400 or more. You can deduct half of it when figuring your income tax.
Try the math. Suppose your side gig brings in $12,000 and your expenses are $2,000, for a net profit of $10,000. Self-employment tax is figured on 92.35% of that, or $9,235, so the tax is about $1,413. Income tax on the profit comes on top of that, at your regular rate.
Paying during the year
The IRS expects tax to be paid as income is earned. You have two options:
- Estimated payments with Form 1040-ES, usually due around April 15, June 15, September 15 and January 15.
- Extra withholding at a regular job, entered on your W-4, which counts as if it were paid evenly through the year.
Paying at least as much as last year’s total tax, or 110% if your income was over $150,000, generally protects you from an underpayment penalty.
Keep records from day one
- Open a separate bank account for the gig.
- Save receipts for supplies, equipment, fees and software.
- Track business miles if you drive for the work.
Your profit and loss goes on Schedule C when you file your return. Good records turn that into an afternoon’s work.
Common questions
I sold some of my own used things online. Is that income?
Selling personal items for less than you paid for them generally isn’t taxable income. Selling items you bought or made to resell is a business.
Do I have to pay quarterly taxes?
If you expect to owe $1,000 or more when you file, the IRS generally expects estimated payments or enough withholding during the year.
Can I deduct my phone or car?
You can deduct the business-use portion. Keep a log of business miles and a reasonable record of how much of your phone use is for the work.