Short answerSide-hustle income faces the same income tax as wages, plus a 15.3% self-employment tax that covers Social Security and Medicare. Nobody withholds it for you, so you track income and expenses yourself. The IRS expects quarterly estimated payments as the income comes in.
Two taxes, not one
W-2 wages split payroll taxes between you and your employer. Self-employed workers pay both halves themselves.
That combined rate is 15.3%: 12.4% for Social Security and 2.9% for Medicare. The Social Security half applies to net earnings up to the $184,500 wage base for 2026. The Medicare half has no wage cap.
On top of that, your net profit faces ordinary income tax like any other income. This page explains the concept, not your tax bill.
What counts
The tax applies to net earnings: income minus ordinary business expenses. Track every payment you receive and every receipt you spend.
Self-employment tax kicks in at $400 of net earnings for the year. Income tax applies too, once your total income passes the filing threshold.
Paying as you go
Nobody withholds tax from freelance payments. The IRS runs a pay-as-you-go system for everyone, employees included.
Employees pay through withholding. Self-employed people pay through quarterly estimated payments. Four times a year you send the IRS a payment covering income tax and self-employment tax on recent earnings.
Miss the rhythm and you can face an underpayment penalty at filing time.
The forms
Schedule C reports your business income and expenses on your tax return. Schedule SE figures the self-employment tax from your net earnings. Both ride along with your regular Form 1040.
A separate bank account or a simple spreadsheet makes April far less painful.
Talk it through
Questions about your own money?
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Christian Brinkley, Greensboro, NC, (919) 408-6671