Who this applies to
If you work for yourself as a freelancer, contractor, gig worker or small business owner, and your net earnings from self-employment are $400 or more, you must file a return and pay self-employment tax. You report business income and expenses on Schedule C.
Self-employment tax
Self-employment tax covers Social Security and Medicare. The rate is 15.3% (12.4% Social Security plus 2.9% Medicare) on 92.35% of your net earnings. The Social Security part applies only up to the annual wage base, which the Social Security Administration sets at $184,500 for 2026. You can deduct the employer-equivalent half of your self-employment tax when calculating your adjusted gross income.
Quarterly estimated payments
No employer withholds tax for you, so you generally need to pay estimated tax if you expect to owe $1,000 or more. You can generally avoid an underpayment penalty by paying the smaller of 90% of this year's tax or 100% of last year's tax (110% if last year's adjusted gross income was over $150,000, or $75,000 if married filing separately).
| 2027 tax year payment | For income earned | Due date (IRS) |
|---|---|---|
| 1st | Jan 1 to Mar 31, 2027 | April 15, 2027 |
| 2nd | Apr 1 to May 31, 2027 | June 15, 2027 |
| 3rd | Jun 1 to Aug 31, 2027 | September 15, 2027 |
| 4th | Sep 1 to Dec 31, 2027 | January 2028 (date set in the IRS 2028 calendar) |
Common deductions
- Home office: a space used regularly and only for business. The simplified method allows $5 per square foot, up to 300 square feet ($1,500).
- Vehicle: business miles at the IRS standard mileage rate, or actual costs.
- Equipment and software: computers, phones and tools used for the business.
- Health insurance: premiums for you and your family, if you are not eligible for an employer plan.
- Retirement: contributions to a SEP-IRA or solo 401(k).
- Qualified business income (QBI): up to 20% of qualified business income for many sole proprietors, subject to limits.
Forms you may receive
Clients may send Form 1099-NEC, and payment apps and marketplaces may send Form 1099-K. The 1099-K reporting threshold is back to more than $20,000 and more than 200 transactions. You must report all business income, whether or not you receive a form.
Keep business and personal money separate
A separate business bank account makes bookkeeping and deductions easier to support if the IRS asks. Some freelancers and LLC owners also start building business credit, which is separate from personal credit. See how to build business credit, or learn the basics with free bookkeeping courses.
Software for self-employed filers
FreeTaxUSA and Cash App Taxes include Schedule C in their free federal returns. TaxSlayer Self-Employed adds tax pro help at a low price, and TurboTax Premium has the strongest guidance. See all best tax software.
FAQ
Do I have to pay taxes on side hustle income?
Yes. All income is taxable. If net self-employment earnings are $400 or more, you also owe self-employment tax.
What happens if I miss a quarterly payment?
You may owe an underpayment penalty, calculated like interest. Pay as soon as you can to reduce it.
Do I need an accountant?
Not necessarily. Most tax software handles Schedule C. Consider a professional if your business is complex.
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Not advice: General information only, not tax, legal or financial advice. Consult a qualified tax professional. Dates and rules can change; check irs.gov for your situation.