The 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 important 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
Many 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 buy 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 helps you attract customers.
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 easy 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 many 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 course — and both could use these expenses as tax write-offs.
Any kind of education that helps a side hustler do their job is considered a business expense.
10. Startup Costs
If you’re just starting out, knowing examples of side hustle tax deductions can help you plan which startup costs to track.
During your first year in business, you can generally deduct up to $5,000 in startup expenses. Anything beyond that amount usually has to be spread out, or “amortized,” over time — details are on the IRS website if you need them.
So, if you begin a yard-sign rental business, you can deduct the cost of your initial stock, business license, and advertising as upfront expenses.
By categorizing these startup costs correctly, you’ll reduce your taxable income right away and set a strong foundation for future deductions.
Related: How to Start a Business in 9 Simple Steps
Additional Expenses You Can Deduct
Beyond the major categories, many gig worker tax deductions like the ones below often get overlooked. Don’t leave money on the table.
- Bank fees on business accounts. Every gig worker needs a business checking account to keep side-hustle-related costs separate from personal expenses.
- Membership dues. Some side hustlers, like actors, writers, carpenters, and electricians, benefit from union or group memberships.
- Contract labor. Sometimes, you can’t do all the work yourself. Gig workers often use contractors and virtual assistants to complete projects.
- Licenses and permits. A gig worker may need government permission, such as a building permit for a contractor, to complete a job.
These smaller items may not feel big on their own, but they add up — especially when most gig workers are juggling taxes on top of everything else. To keep more of what you earn, take full advantage of the write-offs available to you and stay ahead of any surprise tax bills along the way.
Expenses You Can’t (Always) Deduct From Your Side Hustle
Deductions may help preserve your income, but they can get a little tricky. You can’t always deduct an entire expense, and some costs don’t qualify as deductions at all.
These are some of the most frequent side hustle tax deduction mistakes to avoid.
- Clothing. Some people believe that clothing is deductible because it’s protective or bears a company logo. However, the IRS only counts clothing as deductible if it’s required for work and not suitable to wear every day. Uniforms, industry-specific attire, and protective gear often count as deductible items.
- Meals. You can’t list the entire cost of a business lunch as a deduction. The IRS only allows you to deduct 50% of the expense, and the meal must be strictly business-related. This one got a lot of attention and changed during the COVID years, so make sure you know the current rules.
- Travel. As we said above, you can deduct travel costs and mileage from your taxes, but the trip must be business-related. It can include personal activities, but the primary reason for travel must be your side hustle.
- Dual-use items. Cell phones and internet access aren’t the only dual-purpose assets that side hustlers use. Landscapers may mow their own lawns with mowers used for their businesses, and bakers may use their ovens for personal and professional confections. These items are deductible, but you have to prorate their use. Estimate how much you used these assets for your business and only deduct that amount from your taxes.
- Commuting miles. As we said before, a commute to work is never deductible.
Understanding where the IRS draws the line can save you from costly mistakes — and ensure freelancer tax deductions truly work in your favor.
Examples of Deductions by Type of Side Hustle
Almost every kind of side gig has deductions that lower taxable income and make your tax bill easier to handle. Here are a few quick examples.
Uber or Lyft driverEtsy SellerFreelancerPet sitterContent creator
Rideshare drivers can usually write off mileage, tolls, car washes, and even part of their phone bills. Keeping a mileage log or using an app to track trips makes these deductions easier to document at tax time.
If you run a small shop online, you can deduct the cost of supplies and materials, along with packaging, shipping fees, and listing charges. Even part of your home workspace can count if you regularly use it to create or ship orders.
Writers, designers, and other freelancers often have low overhead but still qualify for several deductions — software subscriptions, office supplies, or the percentage of internet use tied to client work.
Anyone caring for pets can deduct business-related expenses like leashes, treats, or liability insurance. The miles you drive to pick up or drop off pets also count as deductible business travel.
Creators and influencers can claim expenses for the tools that make their content possible — cameras, editing software, lighting, or props for photo and video shoots.
The deductions for these examples aren’t limited to what’s listed. Many side hustlers can also write off business licenses, bookkeeping software, or advertising costs if they’re directly tied to earning income.
Keeping Track of Your Side Hustle Expenses
It can feel like a lot at first — every coffee, every supply run, every mile you drive seems to come with a receipt. But once you get the hang of it, keeping tabs on what you spend for your side gig stops feeling like homework and starts saving you money for real.
- Open a separate bank account. Seriously, it’s one of those boring things that makes life easier later. When all your side-hustle money lives in one place, you don’t have to dig through months of mixed transactions every spring.
- Keep a running log of what you buy. A spreadsheet works fine — or one of the apps people swear by, like QuickBooks, FreshBooks, Keeper, or Wave. The tool doesn’t matter as much as actually using it once a week instead of at the end of the year.
- Hang onto your receipts. Paper, photos, email confirmations — whatever form they’re in, just keep them. The IRS can ask for proof, especially for mileage, and it’s a lot less painful if you’ve already got a system instead of a shoebox.
Tracking is only part of it, though. The real payoff comes from staying organized early and planning for deductions well before tax season starts.
Common Questions About Side Hustle Tax Deductions
If you’ve ever tried to read IRS guidance, you know how fast side-hustle tax rules can change. The government keeps tweaking thresholds and limits, and it’s easy to miss what actually matters. Here are a few of the questions people ask most often — answered as plainly as possible.
Related: The Side Hustle You Haven’t Tried Might Be… a W-2 Job
Keep More of What You Earn
A side hustle is still work — just work that happens on your own terms. You put in the hours, and you deserve to keep as much of that effort in your pocket as possible.
Tracking expenses, claiming the deductions you’re entitled to, and understanding how they fit into this year’s tax rules all make a real difference. Fortunately, you can deduct your business expenses and still take the standard deduction, which means your April bill doesn’t have to sting.
Every dollar you deduct knocks 20 to 30 cents off what you owe. It might not sound like much in the moment, but those little wins add up fast, and by the time tax season rolls around, they can feel like free money.
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