How Much to Set Aside From Your Side Hustle and When Taxes Are Due
You owe taxes on side hustle income, and the IRS expects payment in four installments throughout the year, not one lump sum at tax time
Side hustle income is taxable income. The IRS does not care whether you earned it from a full-time job, a part-time gig, freelance work, or selling things online — if you made money, you owe tax on it. The catch is that your employer does not withhold taxes from side income the way they do from a paycheck. That means you have to set money aside yourself and send it to the IRS four times a year, called estimated quarterly taxes. If you do not pay quarterly, you will owe a penalty on top of what you already owe when you file your annual return.
How much you set aside depends on how much you earned and what your total household income is. The math is straightforward once you know your numbers, but many people guess wrong and end up short in April. This guide walks you through what to calculate, when payments are due, and what happens if you miss a deadline.
Key Takeaways
- You must pay estimated quarterly taxes on side hustle income four times a year — April, June, September, and January — not wait until you file your annual return.
- The amount you owe depends on your total household income and tax bracket, not just what you earned from the side hustle.
- A rough starting point is to set aside 25 to 30 percent of your net side hustle income, though your actual rate may be higher or lower.
- You can use IRS Form 1040-ES to calculate your estimated tax, or use a tax software calculator, or work with a tax preparer.
- If you underpay or miss a quarterly deadline, the IRS charges interest and a penalty, but you can still file your annual return and settle the full amount owed.
How much to set aside from each side hustle payment
The percentage you set aside depends on your tax bracket, which is determined by your total household income — your regular job, your spouse's income if you file jointly, and your side hustle income combined. The higher your total income, the higher your tax rate.
A rough starting point: set aside 25 to 30 percent of your net side hustle income. Net income means what you earned minus your business expenses (supplies, equipment, mileage, software subscriptions, anything you bought to do the work). If you have no expenses, your net income is what you earned.
If your total household income is under $50,000, your rate is likely lower — closer to 15 to 20 percent. If your total household income is over $150,000, your rate is likely higher — closer to 35 to 40 percent. These are estimates, not exact figures, because tax brackets change and depend on your filing status and whether you have dependents.
The most accurate way to know what you owe is to use IRS Form 1040-ES, which walks you through the calculation. You can download it free from irs.gov. A tax software like TurboTax or TaxAct also has a quarterly tax calculator. If the math feels overwhelming, a tax preparer or CPA can calculate it for you, usually for $50 to $200 depending on your situation.
When quarterly payments are due
Estimated tax payments are due four times a year on these dates:
| Quarter | Income Period | Due Date |
|---|---|---|
| Q1 | January 1 – March 31 | April 15 |
| Q2 | April 1 – May 31 | June 15 |
| Q3 | June 1 – August 31 | September 15 |
| Q4 | September 1 – December 31 | January 15 (of the following year) |
If a due date falls on a weekend or holiday, the deadline moves to the next business day. You can pay online through irs.gov using the Electronic Federal Tax Payment System (EFTPS), by mail with a voucher, or through a tax software. Online payment is fastest and gives you a confirmation number immediately.
You do not have to pay the same amount each quarter. If you earned more in summer than in winter, you can pay more in the quarter you earned it and less in a slower quarter. The IRS only cares that you pay roughly what you will owe by the end of the year.
What counts as business expenses you can deduct
Your net income — the amount you actually owe tax on — is your gross earnings minus legitimate business expenses. The more expenses you can document, the lower your taxable income and the less you owe in quarterly taxes.
Common deductible expenses for side hustles include supplies and materials, equipment under $2,500, software subscriptions, phone or internet used for the business, mileage to client meetings or supply runs, home office space (if you have a dedicated room), and professional fees like accounting or legal advice. You do not need receipts to claim mileage — the IRS lets you use a standard mileage rate, which changes each year. For 2024, it is 67 cents per mile for business driving.
Keep receipts or records for everything you claim. If the IRS audits you, they will ask for proof. A simple spreadsheet or folder of photos of receipts is enough. Do not guess or claim expenses you did not actually have — that is where audits start.
What happens if you underpay or miss a deadline
If you pay less than you owe, the IRS charges interest on the unpaid amount. The interest rate changes quarterly and is currently around 8 percent per year, though it varies. You also owe a penalty for underpayment, which is separate from the interest. The penalty is usually small if you were close to the right amount, but it adds up if you significantly underpaid.
If you miss a quarterly deadline entirely, the same interest and penalty apply. Missing one deadline does not disqualify you from paying the others — you can still pay Q2, Q3, and Q4 on time and only owe the penalty on Q1.
You do not have to pay the penalty immediately. When you file your annual tax return in April, the IRS calculates what you underpaid, adds the interest and penalty, and either subtracts it from your refund or adds it to what you owe. If you owe more than you can pay, you can set up a payment plan with the IRS.
How to track income and expenses throughout the year
Tracking as you go makes quarterly tax time much simpler. Create a spreadsheet or use a free app like Wave or Zoho Books to record every payment you receive and every expense you pay. Include the date, what it was for, and the amount. At the end of each quarter, add up your income and expenses to see your net income, then calculate your quarterly tax payment.
For income, record the date you were paid, not the date you did the work. For expenses, record the date you paid, not the date you received the item. Keep receipts or screenshots of online purchases. If you are paid in cash, write it down immediately — memory is not reliable.
This habit also makes your annual tax return faster and more accurate. Your tax preparer will ask for a summary of your income and expenses, and if you have been tracking all year, you can hand them a clean list instead of scrambling to reconstruct it from bank statements and old emails.
Self-employment tax on top of income tax
Side hustle income is also subject to self-employment tax, which covers Social Security and Medicare. If you work for an employer, your employer pays half of this tax and you pay the other half, deducted from your paycheck. When you are self-employed, you pay both halves yourself. Self-employment tax is currently 15.3 percent of your net self-employment income (12.4 percent for Social Security, 2.9 percent for Medicare).
This is in addition to income tax, not instead of it. So if your income tax rate is 22 percent and your self-employment tax is 15.3 percent, your total tax rate is around 37 percent. This is why the 25 to 30 percent starting estimate is conservative — it accounts for both income tax and self-employment tax.
You can deduct half of your self-employment tax from your income when you file your annual return, which lowers your taxable income slightly. But you still owe the full amount when you pay quarterly.
Frequently Asked Questions
Do I have to pay quarterly taxes if my side hustle income is under $1,000?
Technically, you still owe income tax on any amount over zero. However, if your total income is very low, you may not owe any tax at all because of the standard deduction. For 2024, the standard deduction is $14,600 for single filers and $29,200 for married filing jointly. If your total household income is below that, you owe no federal income tax. You still owe self-employment tax if your net self-employment income is over $400, regardless of your total income.
Can I pay one lump sum in April instead of four quarterly payments?
You can, but you will owe a penalty for underpayment in each quarter you did not pay. It is cheaper to pay quarterly. If you forget about quarterly taxes and realize in March that you owe a large amount, paying it all in April is better than not paying at all — you will owe a penalty, but at least you will have paid the tax itself.
What if my side hustle income varies a lot month to month?
You can adjust your quarterly payment each quarter based on what you actually earned that quarter, rather than paying the same amount all year. If Q1 was slow and Q2 was busy, pay less in April and more in June. The IRS only cares that you pay roughly what you will owe by year-end. Some people also use the annualized income method, which spreads uneven income across the year — a tax preparer can help with this if your income is very unpredictable.
Do I need to file a separate business tax return for my side hustle?
Not if you are a sole proprietor (you own it by yourself and have not formed an LLC or corporation). You report your side hustle income and expenses on Schedule C, which is part of your regular Form 1040 tax return. If you formed an LLC or S-corp, the rules change — talk to a tax preparer about what forms you need.
What if I overpay my quarterly taxes?
If you pay more than you owe, you get the overage back as a refund when you file your annual return in April. Some people prefer to overpay slightly so they get a refund rather than owe money. There is no penalty for overpaying.