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Side hustle taxes: a plain guide

How side hustle income is taxed when you also have a job, why the rate is higher than you expect, and how to pay it through your paycheck.

Published · 5 min read

A side hustle is work you do for yourself next to a regular job. You might sell things you make, drive, tutor or freelance. If it becomes your full-time work, see our first-year self-employed checklist. The profit from it is taxable income.

Two things often surprise people. The profit is taxed at your highest income tax rate, because your salary uses up the lower rates first. And you also owe self-employment tax on it.

The short version

Words to know

Why the rate is higher

Income tax fills brackets from the bottom up. Your salary fills the lower brackets first. Side profit goes on top.

For 2026, the standard deduction for a single filer is $16,100. The 22% bracket for a single filer runs from $50,400 to $105,700 of taxable income (Rev. Proc. 2025-32).

Self-employment tax

The rate is 15.3% (12.4% Social Security and 2.9% Medicare), on 92.35% of your profit (IRS Topic 554). You can deduct half of it from your income.

Social Security tax stops at $184,500 of earnings in 2026 (IRS). Your wages count toward that limit first. So if your job pays more than that, your side profit owes only the Medicare part.

Pay it through your paycheck

Form 1040-ES says that if you also get a salary, you can file a new Form W-4 and ask your employer to take more tax out (2026 Form 1040-ES). You put the extra amount per pay period in Step 4(c) of the W-4 (Form W-4). The IRS Tax Withholding Estimator helps you find the amount.

You generally need to make quarterly estimated tax payments only if you expect to owe $1,000 or more after withholding and credits (2026 Form 1040-ES).

Forms you may get

The IRS says: “Whether or not you receive a Form 1099-K, you must still report any income on your tax return” (IRS).

An example

Theo builds side tables on weekends. (He is an example, not a real person.) His job pays $95,000, and he is single. His table profit for 2026 is $12,000.

His salary less the standard deduction is $78,900 of taxable income. That is in the 22% bracket, with room for his side profit too.

Step Amount
Self-employment tax: $12,000 × 92.35% × 15.3% $1,695.55
Half of it deducted from income −$847.78
Taxable side income $11,152.22
Income tax at 22% $2,453.49
Total extra federal tax $4,149.04

That is about 35% of his side profit. Other deductions may lower it, and state tax may add to it. He is paid 26 times a year, so he adds about $160 in Step 4(c) of a new W-4.

Each real business cost, such as wood and marketplace fees, lowers both taxes. See what counts as a business expense.

A Righto tip

Keep the side business in its own account. In Righto, you import that account’s statements (CSV, OFX or PDF), and the Profit and Loss report shows your profit so far. You can also ask your own AI agent, such as Claude Code, for that number. See how agents work with Righto.

Common questions

Do I report side income if I got no 1099? Yes. The form rules decide when a payer sends a form, not what is taxable.

Do I need quarterly payments if I have a job? Not if your withholding covers enough of your tax. Extra W-4 withholding is often the simpler way.

Does my employer learn about my side hustle from the W-4? No. Step 4(c) is only a dollar amount.

What to do now

  1. Find your side profit so far this year.
  2. Guess the profit for the full year.
  3. Run the IRS Tax Withholding Estimator with your latest pay stub.
  4. If you are short, give your employer a new W-4 with an amount in Step 4(c).
  5. Open a separate account for the side business.

Righto is free, easy to use and needs no account.

Sources

Righto gives general information, not tax or legal advice. Ask a tax professional about your business.