Yes! Net income, being your earned income minus your deductible expenses, is taxable when it exceeds $400. This often comes as a big surprise to my clients who have a side hustle especially when they have a high paying full time job as well. The side hustle net income is then taxed at the same rate as your full time job income. Nasty! So if your side hustle has a net income of $1,000, you could end up paying $500 in taxes.
I work with so many clients who are devastated when they realize that their side hustle income is being obliterated by taxes. It becomes almost not worth the effort. Please make sure you check with your tax advisor and run tax projections on your side hustle income before you jump up and down with joy and spend it all.
Now there are fantastic tax deductions available and please do make sure that you take all the deductions to which you are entitled.
Another note about side hustles is to be very clear that this is not a hobby. If you incurr losses, being that your deductible expenses are more than the money you earned then you may need to show proof that you intended to make profits and that this is a “real” business or else the IRS is likely to deny your expenses and deem your side hustle a hobby.
So as much as I love a good side hustle to put money in your pocket, I do recommend that you be aware of your tax responsibilities. There are resources on my website that you are welcome to use and I also offer one on one consulting sessions if you need additional help.