Side Hustle Taxes 2026
Your first-year 1099 kit: how much to set aside, what you owe, and what you can deduct.
Side-hustle profit is self-employment income: you owe income tax plus 15.3% self-employment tax, and nothing is withheld. A good rule of thumb is to set aside 25–30% of profit and pay it quarterly with Form 1040-ES. You file Schedule C for income and deductions and Schedule SE for the self-employment tax — and business deductions (mileage, home office, supplies) cut both.
What changes for your taxes
- Your profit is taxed as self-employment income — income tax plus 15.3% SE tax.
- No employer withholds tax, so you pre-pay in quarterly estimated installments.
- You file Schedule C (income/expenses) and Schedule SE (self-employment tax).
- Business deductions lower both your income tax and your SE tax.
The first-year 1099 game plan
The biggest first-year mistake is spending all the money and getting a surprise bill. Because no one withholds tax from 1099 income, set aside roughly 25–30% of your profit as you earn it, and pay it to the IRS quarterly using Form 1040-ES (due April, June, September, and January). This also avoids an underpayment penalty.
The second half of the game is deductions. Track every legitimate business expense — mileage at the standard rate, a home office, supplies, software, phone and internet share, and startup costs. These reduce your net profit, which lowers both income tax and the 15.3% self-employment tax. Many side-hustlers also qualify for the 20% QBI deduction. Our self-employment and quarterly calculators turn your numbers into a plan.
| Annual net profit | Set aside 25% | Set aside 30% | ≈ per quarter |
|---|---|---|---|
| $10,000 | $2,500 | $3,000 | $700 |
| $25,000 | $6,250 | $7,500 | $1,750 |
| $50,000 | $12,500 | $15,000 | $3,500 |
| $100,000 | $25,000 | $30,000 | $7,000 |
Which situation is yours?
Your action checklist
Frequently asked questions
How much should I set aside for side-hustle taxes?
A common rule of thumb is 25–30% of your net profit, which covers self-employment tax (15.3%) plus federal income tax for most people. Higher earners in higher brackets should lean toward the top of that range or above.
Do I have to pay quarterly taxes?
If you expect to owe $1,000 or more, yes — make quarterly estimated payments with Form 1040-ES to avoid an underpayment penalty, since nothing is withheld from 1099 income.
What can I deduct for my side hustle?
Ordinary and necessary business expenses: mileage, home office, supplies, software, a share of phone and internet, and startup costs. They reduce both income tax and self-employment tax.
Sources & verification
Last reviewed July 12, 2026.