This is an estimate, not tax advice. It covers the most common situation: a W-2 job plus a sole-proprietor side gig. It leaves out tax credits, other income, itemized deductions, the 0.9% Additional Medicare Tax on high earners and local taxes. For decisions that matter, check with a tax professional or IRS Publication 334.
How side hustle income is taxed in 2026
Side gig profit gets hit by three separate taxes:
- Self-employment tax. 15.3% on 92.35% of your net profit. It's the Social Security and Medicare that an employer would normally split with you. The 12.4% Social Security part stops at the 2026 wage base of $184,500, counting your W-2 wages first.
- Federal income tax. Side income stacks on top of your salary, so it's taxed at your highest bracket. The calculator works out your tax with and without the gig and shows only the difference.
- State income tax. Entered as a flat rate on your profit.
Two deductions soften the blow: you deduct half of your self-employment tax, and most side businesses also get the 20% qualified business income (QBI) deduction. The calculator simplifies QBI to 20% of profit minus half the SE tax, and only while taxable income stays under $201,750 (single or head of household) or $403,500 (married filing jointly).
The formula
SE tax = net profit × 92.35% × 15.3%
taxable income = W-2 + net profit − ½ SE tax − standard deduction − QBI
federal tax on gig = tax(with gig) − tax(W-2 only)
take-home = net profit − SE tax − federal tax − state tax
Take-home treats your driving as a real cost at the IRS rate, since that rate is meant to cover gas, wear and depreciation.
Example: $20,000 of gig income on top of a $60,000 job
A single filer earns $20,000 from deliveries, spends $2,000 on supplies and fees, and drives 1,000 business miles in each half of the year. State tax is 5%.
| Step | Amount |
|---|---|
| Mileage deduction (1,000 × $0.725 + 1,000 × $0.76) | $1,485.00 |
| Net profit ($20,000 − $2,000 − $1,485) | $16,515.00 |
| Self-employment tax ($16,515 × 92.35% × 15.3%) | $2,333.50 |
| QBI deduction | $3,069.65 |
| Extra federal income tax ($7,071.29 − $5,020.00) | $2,051.29 |
| State tax (5% of $16,515) | $825.75 |
| Total tax on the side gig | $5,210.54 |
| Take-home | $11,304.46 |
That's an effective rate of 31.6% on profit, or about $26.05 of every $100 the gig brings in. Spread over four quarterly payments, it's $1,302.63 each.
Practical tips
- Set aside on every payout. Move the per-$100 amount into a separate savings account the day money arrives. It's much easier than finding $1,300 in September.
- Withholding can replace quarterly payments. Raising the withholding on your W-2 job (Form W-4, line 4c) counts as paid evenly through the year and is easier to automate.
- Track mileage from January 1. In 2026 the rate went from 72.5¢ to 76¢ on July 1, so log dates as well as miles. At these rates, every 1,000 business miles saves this example filer roughly $270 in tax.
- Deduct the obvious costs: platform fees, supplies, a share of your phone bill, software and equipment. Keep receipts.
- Know the safe harbor. You avoid underpayment penalties by paying at least 100% of last year's total tax (110% if your AGI was over $150,000) through withholding and estimates.
Frequently asked questions
How much should I set aside for taxes on side hustle income?
Most people with a full-time job should set aside 25% to 35% of side gig profit. Self-employment tax alone is about 14.1% of profit, and your side income is taxed at your top federal bracket on top of that, plus state tax. The calculator above gives a per-$100 figure for your situation.
Do I have to pay taxes on side hustle income under $600?
Yes. All side income is taxable no matter how small, whether or not you get a 1099. The 1099 reporting threshold only controls when a payer must send a form. Self-employment tax kicks in once net self-employment earnings reach $400 for the year.
What is the self-employment tax rate for 2026?
It is 15.3% on 92.35% of your net profit: 12.4% for Social Security and 2.9% for Medicare. The Social Security part stops once your W-2 wages plus self-employment earnings reach the 2026 wage base of $184,500. You can deduct half of the self-employment tax when figuring income tax.
Do I need to make quarterly estimated tax payments for a side gig?
Generally yes, if you expect to owe $1,000 or more when you file. For 2026 income the due dates are April 15, June 15 and September 15, 2026, and January 15, 2027. Instead of quarterly payments, you can raise the withholding at your day job to cover the side gig tax.
Can I deduct mileage for my side hustle?
Yes, for business driving such as deliveries, rideshare or trips to buy inventory, but not your commute. For 2026 the IRS standard mileage rate is 72.5 cents per mile for January through June and 76 cents per mile from July 1. Keep a log with dates, miles and purpose.
Does the side hustle qualify for the 20% QBI deduction?
Usually. Sole proprietors can deduct up to 20% of qualified business income, and the deduction was made permanent in 2025. Below the 2026 taxable income threshold of $201,750 (single or head of household) or $403,500 (married filing jointly), most side businesses get the full deduction.
Rates and figures last checked September 2026.
This calculator gives estimates for planning. Check current rates and product labels before you buy, list or file.