10-07-2025
Avoid Unexpected Tax Bills: Essential Tips for Side Hustlers in 2025
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As inflation drives up the cost of almost everything, more Americans are turning to second jobs or weekend side gigs —whether driving for Uber after work or selling handmade crochet dolls online. While the extra income helps cover rising expenses, many people don't realize the tax responsibilities that come with side gigs. If you're unprepared, you could face a surprise bill from the IRS .
According to Bankrate's latest Side Hustle Survey, 27% of U.S. adults currently juggle a side job alongside their primary employment, down from 36% in 2024. But even with that slight dip, a LendingTree survey shows that nearly 40% of Americans rely on side hustles, and 61% say life would be unaffordable without the extra income.
Now, some good news could be coming for gig workers: Starting in 2026, the One Big Beautiful Bill will bump the qualified business income (QBI) deduction from 20% to 23% for pass-through entities like sole proprietors and partnerships. That means a bigger tax break is on the horizon, but staying sharp about your 2025 taxes is still essential for now.
Here are some ways to avoid future tax trouble. Track all your income. Whether you're freelance writing, driving for Uber, selling items online or tutoring, log every dollar you make. Use apps or simple bookkeeping tools to stay organized and make tax time way less painful.
Whether you're freelance writing, driving for Uber, selling items online or tutoring, log every dollar you make. or simple bookkeeping tools to stay organized and make tax time way less painful. Understand your side gigs. Freelance work can cover many hustles, from dog walking to delivering food. Each type has its own tax details, so keep your income streams separate and know the specific rules for your hustle.
Freelance work can cover many hustles, from dog walking to delivering food. Each type has its own tax details, so keep your income streams separate and know the specific rules for your hustle. Save receipts and track expenses. One of the perks of side gigs is deducting business costs, like your home office, software, supplies and mileage.
One of the perks of side gigs is deducting business costs, like your home office, software, supplies and mileage. Set money aside for taxes. A good rule of thumb is to save about 25 to 30% of your earnings for taxes. Putting aside cash as you go makes it way easier to pay quarterly or file your taxes without stress.
A good rule of thumb is to save about 25 to 30% of your earnings for taxes. Putting aside cash as you go makes it way easier to pay quarterly or file your taxes without stress. Pay quarterly estimated taxes. If you make over $400 from side gigs, you'll likely need to make estimated payments four times a year. This helps you avoid a large tax bill in April.
When it comes to side gigs, income isn't just what you get from a big client or weekly Uber payout. The IRS wants to know about all the money you make—even if it feels small or casual.
That includes income from: Freelance jobs. Whether you tutor, write, take photos or work as a virtual assistant, this is income you must report.
Whether you tutor, write, take photos or work as a virtual assistant, this is income you must report. Cash payments. Yes, cash payments can be taxable, even if you're paid under the table.
Yes, cash payments can be taxable, even if you're paid under the table. Peer-to-peer apps. If you're paid for services through Venmo, Zelle, Cash App or PayPal, you still need to report it.
If you're paid for services through Venmo, Zelle, Cash App or PayPal, you still need to report it. Online sales. Selling on different platforms like Etsy, Depop and Poshmark all count, especially if you're doing it regularly.
Selling on different platforms like Etsy, Depop and Poshmark all count, especially if you're doing it regularly. Barter work. If you trade a service (e.g., website design) for something else (e.g., free yoga classes), the fair market value of what you received is taxable.
If you trade a service (e.g., website design) for something else (e.g., free yoga classes), the fair market value of what you received is taxable. Platform payouts. Uber, DoorDash, Instacart, Airbnb and other platforms often issue 1099s. Even if they don't, you must report what you earned.
New IRS rules for 2026 mean even small transactions might trigger a 1099-K form from apps like PayPal or Etsy if you hit the $600 threshold. But even if you don't receive a form, you still have a legal obligation to report that income.
The good news about side gigs is that you can lower your taxable income by writing off legitimate business expenses. But you need to stay organized and be honest about what qualifies.
Here's what you can usually deduct: home office
phone and internet bills
mileage and car expenses
software and subscriptions
supplies and equipment
And here's what you can't deduct: commuting costs
personal expenses
clothing
personal meals or entertainment
Side gigs offer a great way to boost your income—especially with rising costs—but taxes can catch you off guard if you're not prepared. Keep detailed records, understand what counts as income and save money for taxes.
When in doubt, talk to a tax pro who knows side hustles; it can save you headaches (and even dollars). Stay organized, stay informed and keep your side hustle working for you, not the IRS.
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