We live in a gig economy where it’s never been easier to pick up a side hustle that fuels a passion or adds a few extra dollars to your wallet. However, juggling statements and expenses between your side job and 9-5 can prove stressful when filing your taxes. Keep reading for a rundown that could help you file your side hustle taxes confidently and efficiently.
It’s advised that you save about 35% of your side hustle income for tax purposes, considering that on top of federal and state income tax, side hustlers often pay a self-employment tax. Unfortunately, side hustlers make a common mistake: they don’t account for this high percentage until it’s time to file.
Do yourself a favor by planning for owed taxes long before they’re due. Cementing a routine of reviewing and categorizing your secondary income will provide the peace of mind that essential numbers are accounted for. Here are a few tried-and-true tips for implementing into your new tax routine:
Getting organized as soon as possible is the key to ensuring your taxes are filed correctly and efficiently—it pays to prepare!
Your side hustle may qualify for some tax write-offs you wouldn’t otherwise have from your 9-5 job. For example, suppose your side hustle is your own business, like running a Shopify store or offering freelance marketing services. In that case, you could qualify for a write-off on all “ordinary” business expenses that come with your self-employed venture. Common write-offs include everything from home office expenses like stationery and furniture, electronics dedicated to work, and contract labor expenses like an accountant or virtual assistant. Maintaining a solid record of your side hustle expenses will ensure that you don’t miss out on potentially lower income taxes when filing your next return.
It’s important to note that self-employed individuals need to pay taxes every quarter compared to those working under an organization, as no employer is withholding taxes from paychecks. Therefore, if you’re expecting to owe over 1,000 dollars come tax time, be sure to account for these quarterly payments and implement all tax prep into your current schedule—this is where the 35% of the income you’ve saved comes to use!
Check out our previous blog post on 4 Budgeting Apps to Look Out for This Spring. In addition, if you need personalized tax advice, our team is always here to help—contact us today to book an appointment!