How to File Taxes for Your Side Hustle in 2026

Filing taxes for your side hustle is easier when you understand how the IRS treats self-employment income and what steps you need to take throughout the year. Whether you drive for a rideshare company, sell products online, run a freelance service, or operate a small part-time business, 2026 brings important tax rules that every side hustler should know about. With good records, awareness of your obligations, and the right support, you can stay compliant and maximize your savings year-round.

Use this guide to learn how to file taxes for side hustles, whether you focus on one or several. 

Key Highlights

• Side hustle income is taxable and usually requires filing as a self-employed individual on Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship)

• IRS Form 1099-K threshold increases to $20,000 and 200 transactions in 2025, which affects many gig and platform workers.

• Beginning in 2026, IRS Form 1099-NEC, Nonemployee Compensation, and IRS Form 1099-MISC, Miscellaneous Information, reporting thresholds rise to $2,000.

• Quarterly estimated tax payments remain a requirement for many freelancers and side hustlers.

• Strong, consistent bookkeeping and documentation are essential for claiming deductions and reducing your tax bill.

• Working with a dedicated accountant can help you maximize deductions and stay ahead of changing tax rules and deadlines.

What counts as a “side hustle” and who must file

Before you learn how to file taxes for a side hustle, it's critical to understand what it is. If you earn income from independent contracting, gig work, or any activity outside your IRS Form W-2, Wage and Tax Statement job, the IRS considers that taxable income. Most side hustlers operate as sole proprietors, which means your business is not separate from you for tax purposes. You report income and expenses on Schedule C, which is filed with your IRS Form 1040, U.S. Individual Income Tax Return.

If your side hustle grows, you may eventually consider forming a limited liability company (LLC). An LLC business can offer benefits, such as liability protection and potential tax flexibility. Understanding how to file your taxes correctly becomes even more important with this kind of structure.

You must file in 2026 even if you don't receive a 1099 if:

• You earn $400 or more in net self-employment income

• You earn side income without tax withholding

• Your total income exceeds the general IRS filing requirements

Even a small profit means you owe self-employment tax.

What tax forms you’ll likely need in 2026

Form 1040 + Schedule C (Profit or Loss from Business)

IRS Form 1040 is your standard individual tax return, and Schedule C reports income and expenses for your side hustle. You detail revenue along with costs such as:

• Supplies

• Software

• Mileage

• Advertising

It's not uncommon to work multiple side gigs. If you work more than one side gig, use: 

• Separate Schedule C forms for distinct businesses, such as your rideshare side gig and your handmade goods business

• A consolidated Schedule C if your gigs are similar in nature.

Schedule SE (Self-Employment Tax)

If your side hustle’s net earnings are $400 or more in a year, you’re responsible for paying the 15.3% self-employment tax that funds Social Security and Medicare. W-2 employees split this cost with their employers, but self-employed individuals pay the full amount, although half can be deducted at tax time. The tax applies to your net earnings, which are your income after eligible business expenses.

Planning ahead is essential so that this tax does not surprise you during filing season. Submit your self-employment taxes via Schedule SE (Form 1040), Self-Employment Tax.

Income reporting (even if you don’t get a 1099)

You may receive the following 1099 forms as a result of your side hustle income:

• 1099-NEC for services

• 1099-MISC for miscellaneous earnings

• 1099-K for payment platform income

Track All Income Sources

Income sources include:

• Digital platform payments

• Bank transfers

• Client invoices

• Cash earnings

Because 1099 thresholds are changing, you should not rely on forms alone to reflect all income.

Separate Personal and Business Finances

A separate account isn't mandatory, but it simplifies tracking and reduces errors.

Use Reliable Bookkeeping Tools

Accurate records support your deductions and help avoid mistakes. Many entrepreneurs benefit from outsourced support, such as year-round bookkeeping for an affordable, tax-deductible fee from 1-800Accountant, America's leading virtual accounting firm.

Common side-hustle business expenses to deduct

Good recordkeeping is critical when claiming business deductions. Ensure you retain receipts, invoices, deposit slips, and canceled checks.

This enables you to claim common deductible expenses, including:

• Home office space

• Mileage

• Supplies and equipment

• Software

• Advertising

• Phone and internet

• Professional services

• Education related to your business

Accurate documentation and clear separation of personal and business expenses help ensure you do not miss valuable deductions. Many side hustlers see meaningful tax savings once they begin working with an expert who reviews their expenses and identifies opportunities.

Estimated taxes and deadlines

If you will owe at least $1,000 in taxes for the year from your side gig, the IRS expects you to pay estimated taxes quarterly. W-2 employees have taxes withheld from their paychecks by their employers, while no tax is withheld for side gig payments.

The calculation for quarterly estimated taxes for gig workers is based on expected income, self-employment tax, and income tax. We recommend setting aside roughly 25%–30% of your side gig earnings each year to cover this liability.  

Here are the 2026 deadlines for quarterly taxes:

Do you need to pay taxes on side gigs? If you are unsure how much to pay, a professional can help you estimate the correct amounts and avoid penalties when filing taxes for gig workers. 

Special considerations for 2026 (what side-hustlers should watch for)

Several updates in federal law now influence how independent workers handle tax reporting.

Higher 1099-K Threshold Starting in 2025

Beginning with the 2025 tax year, platforms like PayPal, Venmo, Etsy, and Stripe will only issue Form 1099-K if you exceed both:

• More than $20,000 in payments

• More than 200 transactions

This reflects updates included in the One Big Beautiful Bill Act.

Higher Thresholds for 1099-NEC and 1099-MISC in 2026

Starting in 2026, businesses only need to issue a 1099-NEC or 1099-MISC if they pay you $2,000 or more during the year. Until then, the $600 threshold applies.

Although you may receive fewer forms, you still must report all income, even if you do not receive a document.

When it comes to state tax obligations, depending on where you live or work, state filing rules may apply. Review state requirements immediately to familiarize yourself with state and local tax obligations. 

What to do if you mess up

If you mess up any aspect of your side gig tax responsibilities, such as missed income, underpaid taxes, or no 1099, it's important to correct the issue. 

• Voluntary disclosure and reporting are better than letting the IRS discover mistakes on its own.

• Even if you didn’t receive a 1099, you should gather all records, including bank statements, cash receipts, invoices, and platform earnings dashboards, to ensure you accurately address your tax responsibilities. 

1-800Accountant can help assess missed income, file amended returns, or set up estimated payments going forward to prevent further mess-ups. 

Tips to make tax time easier next year

The following tips and considerations will help make your 2026 tax year easier and more efficient. 

• Keep a separate bank account for your side hustle business. Separate all business and personal accounts to promote efficiency. 

• Use bookkeeping or accounting software and tools to track income and expenses throughout the year, minimizing human error. 

• Save receipts, invoices, mileage logs, and home office expense records — organized by category and date.

• Review your quarterly estimated payments at least once per quarter, and adjust as needed.

• Consider hiring a tax professional like 1-800Accountant if you have more than one side gig, complex expenses, or want to maximize tax deductions with ease.

How 1-800Accountant can help

Running a side hustle is an exciting way to increase your income and expand your skills. Understanding how taxes work in 2026 allows you to stay compliant and make the most of your deductions, as side hustles can get complicated, especially if you have more than one. With strong bookkeeping and the right guidance, you can navigate tax season with confidence and keep your business growing.

You may want affordable, tax-deductible accounting support if:

• You have income from multiple platforms

• You want to maximize deductions

• You are unsure whether you need estimated payments

• Your income fluctuates

• You are considering forming an LLC

• You simply do not wish to manage bookkeeping yourself

For reliable year-round support, explore 1-800Accountant’s services for small business owners. A dedicated accountant can help you stay organized, compliant, and prepared for tax season.