Side Hustle Tax Deductions for 2025: The Complete Guide
Trying to make the most of side hustle tax deductions? You are in the right place. Below we break it down in plain English, with practical tips you can actually use.
Key Takeaways
- Side Hustle Tax Deductions for 2025: The Complete Guide Smart tax deductions can make a big difference when you’re self-employed.
- Here’s how to find out what counts, what doesn’t, and how to keep more of your side hustle income when tax season comes around.
- Written by Ben Watson, CPA Last Updated: November 4, 2025 Home Side Hustles Side Hustle News The IRS expects you to report every dollar of s...
Smart tax deductions can make a big difference when you’re self-employed. Here’s how to find out what counts, what doesn’t, and how to keep more of your side hustle income when tax season comes around.
Written by Ben Watson, CPA Last Updated: November 4, 2025The IRS expects you to report every dollar of side hustle income. But here’s the real mistake most gig workers make: skipping deductions that could save hundreds , even thousands , of dollars in taxes. That’s what makes side hustle tax deductions more key than ever.
Notably, business deductions lower both income tax and self-employment tax. They’re separate from the standard deduction, so you can take both.
Let’s look at the kinds of side hustle tax write-offs you can claim as a gig worker, freelancer, or small business owner , and how new regulations are shaping the tax landscape in 2025.
How Side Hustle Tax Write-Offs Work
Numerous first-timers wonder, “Do I need to pay taxes on side hustle income?” The short answer: yes , all self-employment income over $400 must be reported. (It’s called the $400 rule.)
This means a tax deduction is more than a nice-to-have , it’s what determines how much of your side hustle money the IRS taxes. Also known as a “tax write-off,” it’s an expense that can be deducted from your gross earnings to lower taxable income. The IRS defines these deductions as costs that are “ordinary and necessary” for running a business, meaning they are common in a specific industry and for daily operation.
As a side hustler, you can use deductions to reduce your net profit and lower both income and self-employment taxes. For example, let’s say you make $10,000 as an Uber driver and you deduct $4,000. You would then pay taxes on your net income of $6,000 instead of your $10,000 gross. The lower your net profit, the less you owe.
Note that business expenses are separate from itemized deductions, or the standard deduction, and are recorded on the Schedule C form if you file as a Single-Member LLC or Sole Proprietorship. This is what makes 2025 self-employed tax deductions so critical for gig workers.
Top 10 Side Hustle Tax Deductions for 2025
Not all write-offs are equal. Here are the ten categories that represent the best tax deductions for side hustles.
1. Mileage & Vehicle Expenses
The 2025 business mileage rate is 70¢ per mile, according to the IRS. You can deduct 70¢ from your taxable income for every business mile you drive.
Say you spend half the year delivering for DoorDash, jotting down every trip in a notebook or mileage app. By December, your log shows about 5,000 miles driven for work. At tax time, those miles translate to a $3,500 deduction , 70¢ for every business mile you racked up.
This mileage doesn’t include a regular commute. For instance, if you run a dog grooming service out of a friend’s garage, you can’t deduct the miles you drive every morning to your place of business. W-2 workers can’t deduct their daily drives, and unfortunately, neither can you.
2. Home Office Deduction
When it comes to side hustling, a home office can be more than a Pinterest-friendly luxury , it can be a helpful write-off, too. You can use the simplified method and deduct $5 per square foot of dedicated workspace at home, up to 300 square feet (maximum $1,500). The space must be used exclusively and regularly for business, not part-time as a guest room or hobby corner.
For instance, maybe you turned a spare 150-square-foot bedroom into your sewing studio for the Etsy shop you run. That dedicated setup can earn you a $750 deduction when you file.
3. Phone & Internet
Few businesses can thrive in the modern world without the internet , and none of them can survive without phone access. That’s why phone and internet expenses are common business deductions. The IRS lets you write off the portion of your phone or internet bill tied directly to your side hustle. If around 40% of your calls and Wi-Fi use go toward client work, then 40% of those costs count as business expenses.
It’s not a massive write-off, but over a year, it can still shave a nice bit off what you owe.
4. Tools of the Trade
Almost every business requires some sort of supplies. Hang on to receipts for any supplies, tools, or software you pick up for your hustle , every purchase connected to earning income can help lower your tax bill.
Think of things like yarn for your Etsy hats, a Canva or Photoshop subscription for client projects, or the leashes you purchase for your dog-walking gigs.
Bigger purchases , cameras, laptops, even a delivery car , may need to be depreciated over several years instead of being claimed all at once. That method spreads the deduction to match the income that those tools help you earn, which can make a real difference in how much tax you owe each year.
5. Advertising & Marketing
You won’t earn money if people don’t know you offer a product or service, so advertising and marketing costs definitely count as business expenses for side hustles. You can also write off the cost of promoting your business , things like paid ads, a website domain, business cards, or any other marketing that lets you you attract shoppers.
Picture a math tutor who wants to reach more local parents , they could run a few Facebook ads, then deduct that ad spend at tax time.
Related: 21 Low-Cost or Free Small Business Marketing Ideas
6. Platform & Transaction Fees
Platforms like Etsy, Lyft, or DoorDash make it simple to find work, but they take a cut of your earnings in the form of service or transaction fees. Transaction services like PayPal and Stripe also take their share of profits.
Fortunately, you can deduct all those platform and transaction fees from your gross income total, making the costs a little less painful.
7. Professional Help
Sometimes, you just can’t side hustle alone. The IRS considers any assistance you need , including financial and legal help , to be “ordinary and necessary” expenses.
For example, if your graphic design business grows quickly and the financial aspects get too complicated, you can deduct the cost of CPA assistance on your taxes. Or, say you’re a freelance writer who needs to consult with a lawyer about copyright law. In that case, you can deduct the fee.
You could also try tax software for freelancers as a more affordable alternative.
8. Insurance
Not all side hustles require insurance, but some do , and the premiums are deductible.
For example, Lyft, Uber, and DoorDash drivers all need car insurance, which becomes a deductible expense once someone starts using their personal vehicle to make money. Keep in mind that you can only deduct the business percentage (see the phone and internet example above).
Or, if you don’t want to estimate, you can just track your miles. Car insurance, gas, and car repairs are all covered in the 70¢-per-mile rate mentioned above. You can take that lump-sum mileage deduction or list them separately, including your car-insurance estimate.
Anyone with side gigs like personal training, contracting, or home-based businesses might also want to invest in liability insurance to protect themselves in case of client accidents.
Insurance isn’t a cost people commonly associate with side hustles, but numerous self-employed workers invest in several varieties of protection, and they can deduct any business-related premiums from their taxes.
9. Professional Development
Education costs are also common deductions for side hustlers. A nanny might earn a CPR certification, and a bookkeeper might take a basic accounting
Final Thoughts
Before you check out, double-check side hustle tax deductions against current offers and any coupons you can stack. Small habits like this add up to real savings over a year.
Originally published at dollarsprout.com.
Ben Watson, CPA
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