I’m a Salaried Worker With a Side Hustle. What Tax Breaks Can I Get?

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A side hustle could not only boost your income, but score you some tax breaks. Read on to learn more. 

There are plenty of good reasons to get a side hustle, like being able to boost your savings account balance or pay down pesky debt. And if you opt to get a side hustle this year, you’ll probably be in good company. That’s because as of last year, a good 40% of Americans were working a side hustle, according to data from Zapier.

But while it’s clear that a side gig could work wonders for your bank account, it could also benefit you from a tax perspective. Here are a few tax breaks you can enjoy when you work a side hustle in a self-employed capacity.

1. You can claim a deduction for equipment and supplies

If you buy a new laptop to play around on for non-work purposes, then you can’t claim that expense on your taxes. But if you have a side hustle that involves writing content or designing websites, and you’re buying a laptop to make that work possible, then that device becomes a deductible expense for you.

The IRS allows you to deduct the cost of equipment and supplies needed to uphold your side gig. This means that if you have a dog-walking business and buy treats for your furry friends, you can write off the cost of doing so.

2. You can deduct the cost of services you pay for to do your work

If you’re a content writer, you probably need an internet connection to do research and submit your work. As such, you can deduct the cost of paying for internet service on your taxes, and that holds true for any other service you pay for that enables you to earn a side income. So if, for example, you have a pet care business and you take a course in dog training to get better at what you do, that could be an appropriate expense to deduct.

3. You can deduct travel costs

You may need to travel, whether a short distance or a long one, to maintain your side hustle. And travel costs are considered a deductible expense.

So if you’re a dog-walker and you drive all over town to clients’ homes, you can claim a mileage deduction, provided you keep good records for the IRS. And if you’re a web designer and need to board a train to travel 150 miles to meet with a client, that ticket cost is deductible, too.

4. You can contribute to a SEP IRA

Saving for retirement in an IRA is a good way to enjoy a tax break on your contributions — at least with a traditional IRA, not a Roth, which is funded with after-tax dollars. But both traditional and Roth IRAs max out at $6,500 this year for savers under age 50 and $7,500 for those 50 and over.

If you work a side hustle in a self-employed capacity, it renders you eligible to contribute money to a SEP IRA. A SEP IRA allows you to contribute more toward retirement than a traditional or Roth IRA. This year, the limit is $66,000, though the amount you’ll be allowed to put into one of these accounts will hinge on your self-employment income.

Working a side hustle could open the door to a host of tax breaks. But to be clear, the above benefits will only apply if you’re self-employed in the context of your side hustle. If you’re put on somebody’s payroll as a part-time worker, the rules work differently. And if you’re not sure what tax breaks to claim, it’s best to consult an accountant who can tell you what benefits you are and are not eligible for.

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