Side hustle taxes: what to set aside
Side income from gigs, selling or freelancing is taxable, and no one withholds for you. You may owe income tax plus self-employment tax of about 15.3% on net earnings once you net $400, and state tax. Many people set aside roughly 25% to 30% of each payment. If you’ll owe $1,000 or more, pay quarterly estimated taxes, usually in April, June, September and January. Track income and expenses in a separate account, and report all income, with or without a 1099.
Your checklist
- Side income is taxable
- Know self-employment tax (~15.3%)
- Set aside 25–30% as a rough guide
- Pay quarterly estimated taxes
- Track income and expenses
- Report all income, 1099 or not
Rather read it? Here’s the whole thing.
It’s taxable income
Money from gig apps, freelancing, selling things you make, reselling, or a small business is generally taxable. Unlike a paycheck, no taxes are withheld.
Taxes you may owe
- Income tax on your profit.
- Self-employment tax, about 15.3% of net earnings, covering Social Security and Medicare, once net earnings are $400 or more.
- State and local taxes in many places.
How much to set aside
A common rule of thumb is 25% to 30% of side income, kept in a separate savings account. Your actual amount depends on your total income, deductions and state. A tax professional or IRS tools can help you estimate.
Estimated taxes
If you expect to owe $1,000 or more for the year, the IRS generally expects quarterly estimated payments (Form 1040-ES), usually due in April, June, September and January. Paying at least as much as last year’s tax (more for higher incomes) or 90% of this year’s usually avoids underpayment penalties. If you also have a job, increasing W-4 withholding can work instead.
Keep records
Use a separate bank account, log all income, keep receipts for expenses, and track business mileage. Expenses reduce taxable profit.
1099 forms
Clients may send Form 1099-NEC, and payment platforms may send 1099-K. Report all business income even if no form arrives.
Official sources, and where to look
- IRS: self-employed individuals tax centerirs.gov
- IRS: estimated taxesirs.gov
- IRS: gig economy tax centerirs.gov
IRS Form 1040-ES[your state] estimated tax payments
Common questions
Do I have to pay taxes on a small side hustle?
Generally yes. Self-employment tax applies once net earnings reach $400, and income tax depends on your total income. More ›
What if I already missed estimated payments?
Pay as soon as you can to reduce penalties, and adjust for the rest of the year. More ›
How much should I set aside for taxes on side income?
Many people use 25% to 30% as a rough guide. Your actual rate depends on total income, deductions and your state. More ›
What is self-employment tax?
About 15.3% of net self-employment earnings, covering Social Security and Medicare, owed once net earnings reach $400. More ›
Do I need to pay quarterly taxes on a side hustle?
If you expect to owe $1,000 or more, the IRS generally expects quarterly estimated payments. Increasing W-4 withholding at a job can also work. More ›
When are estimated tax payments due?
Usually in April, June, September and January. Check the IRS calendar each year. More ›
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Not yet reviewed by an expert. Last checked 2026-10-29. This is general help, not legal, medical or professional advice. Rules are different in every state.