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Filing your tax return at tax time
You’ll probably need to file a Schedule C. This is where sole proprietors can report their business income and expenses.
What it means: At tax time, a lot of your record-gathering and number-crunching will revolve around completing this form. As a result, you may need to spend more on advanced tax software or human tax preparers.
Taking advantage of tax deductions
Generally, expenses incurred in operating your business can be tax-deductible. IRS Publication 535 lays out many of the rules. Plus, because of the qualified business income deduction, you may qualify for a deduction of up to 20% of your side-gig income.
What it means: You could end up with a lower tax bill. If your total 2025 taxable income was at or below $197,300 for single filers or $394,600 for joint filers, you’re more likely to get this tax break. People over the limit may still get a partial break, but the rules get more complicated.
» MORE:15 self-employment deductions to know about
Understanding the taxes you might need to pay
You may need to pay self-employment tax. The IRS imposes a 12.4% Social Security tax and a 2.9% Medicare tax on your net earnings. Typically, employees and their employers split that bill. But self-employed people pay the whole thing.
What it means: For the 2025 tax year, only the first $168,600 of earnings was subject to the Social Security portion. In 2026, only $184,500 are subject. A 0.9% additional Medicare tax may also apply if your net earnings from self-employment exceed $200,000 if you’re a single filer or $250,000 if you’re filing jointly. To calculate how much you’ll owe, you may need to add Schedule SE to your tax filing to-dos.
Setting up your own freelancer retirement plan
Going solo usually means saying goodbye to employer-sponsored retirement plans, but who says you can’t start your own? Solo 401(k)s and Simplified Employee Pension Individual Retirement Accounts (known as SEP IRAs) offer ways to have a side gig and still build a nest egg, and the contributions could be tax-deductible.
Hiring someone versus doing it yourself
Taxes are complicated, and they can be even more complicated when you have a side gig. There are extra forms to fill out, along with many rules about the right way to report your income and even more rules about how to handle your expenses. Hiring someone to do your taxes could be a good move, but if you’re confident with taxes, you might save money doing them yourself.
What it means: If the tax forms landing in your mailbox are completely foreign to you, take them to a human preparer. Be sure the preparer has a PTIN, is established in the area, has valid qualifications, can handle the workload involved with preparing your return and can represent you in front of the IRS if something goes wrong. And if you want guidance and help with long-term tax planning rather than just data entry and bill calculation, it’s probably better to visit a financial advisor with tax advising experience.
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1.Internal Revenue Service.
