Money moment. Free, no account.
You started making side income
Money from freelance work, gigs or a small business arrives without tax taken out. You report it, you pay self-employment tax on it, and you may owe tax during the year instead of in April.
First 3 things this week
About 30 seconds to read. Ticks stay on this device.
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How it works
Report all of it
The IRS says you must report income from side work on your tax return even if it is part-time or temporary, and even if no 1099-K, 1099-NEC, 1099-MISC or W-2 reports it. Keep a log of payments and expenses as they happen.
Expect self-employment tax
Self-employment tax is 12.4% for Social Security plus 2.9% for Medicare, 15.3% in all, on 92.35% of your net profit. It applies once net earnings reach $400, and you can deduct half of it when you figure income tax. It is separate from income tax.
Pay estimated tax during the year
The IRS expects estimated payments from people who expect to owe $1,000 or more when they file. The 2026 due dates are April 15, 2026, June 15, 2026, September 15, 2026 and January 15, 2027. You can also raise withholding at a day job instead.
Track the deductions
Ordinary and necessary business costs lower your net profit, and net profit is what both taxes are figured on. Keep receipts, and separate business costs from personal ones. A tax pro can tell you which costs apply to your kind of work.
A worked example
Sample, not your numbers
Self-employment tax on a small side business
Sample numbers: $20,000 of net profit for the year, after business costs. Income tax comes on top of this and is not shown.
- Net profit x 92.35%
- $18,470.00
- Social Security part
- $2,290.28
- Medicare part
- $535.63
- Self-employment tax
- $2,825.91
- Half you can deduct
- $1,412.96
About 14% of net profit goes to this tax alone, before income tax. That is why a set-aside from every payment is easier than one bill in April.
What to ask HR, your lender or a tax pro
A tax pro
- Which of my costs count as business deductions, and how should I document them?
- How much should I pay each quarter so I avoid an underpayment penalty?
- Does it make sense to form an LLC or another entity at my income?
- What do I owe my state on this income?
The business that pays you
- Will you send a 1099, and what name and taxpayer number do you have on file for me?
Run your own numbers
- 1099 quarterly taxes labEstimate each 2026 quarterly payment and the share of 1099 pay to set aside.
- Side hustle ROI labFind the real hourly return after costs and self-employment tax.
- Tax deductions labCompare standard against itemized on your real numbers.
- Chapter 10: tax optimization & planningTax-aware investing basics
Chapter 16: business & entrepreneurship finance covers business structure, costs and pricing for a small business. Chapters 4 to 18 are Pro.
Sources
- IRS topic 554: self-employment tax (opens in a new tab)
- IRS: estimated taxes (opens in a new tab)
- IRS: 2026 Form 1040-ES (opens in a new tab)
- IRS: gig economy tax center (opens in a new tab)
- SSA: contribution and benefit base (wage cap) (opens in a new tab)
Figures read from these pages on October 6, 2026. The example leaves out income tax, state tax and the 0.9% additional Medicare tax at higher incomes. Above the Social Security wage base the Social Security part stops. Estimated payment rules have safe harbors that a tax pro can apply to your year.
Education, not financial, tax or legal advice. The example uses sample numbers, and your own situation will differ.