Side hustlers often misunderstand the $600 reporting threshold, thinking it means they owe no taxes below that amount. The real rule is simpler and stricter: you must pay self-employment tax on net earnings of $400 or more from any side gig.
The $600 threshold only triggers when clients or platforms issue a 1099 form to the IRS. You could earn $500 without receiving a 1099, yet still owe taxes. The IRS expects you to report all self-employment income regardless of whether you get a form.
Self-employment tax covers Social Security and Medicare contributions. When you work for an employer, your boss splits these costs with you. Self-employed workers pay both halves themselves, currently totaling 15.3 percent of net earnings (12.4 percent for Social Security on earnings up to $168,600 in 2024, plus 2.9 percent Medicare on all earnings).
Here's what triggers the obligation. If your net self-employment income reaches $400 in a tax year, you owe SE tax. Net income means revenue minus legitimate business expenses like supplies, equipment, mileage, or home office deductions. A freelancer earning $800 gross but spending $450 on supplies has net income of $350. They wouldn't owe SE tax that year. But earn $600 net, and you cross the $400 threshold.
You report this on Schedule SE when filing your tax return. The form calculates your SE tax liability. You then claim half of what you paid as a deduction on your income tax return, which reduces your overall tax burden slightly.
Common side hustles triggering SE tax include freelance writing, tutoring, consulting, rideshare driving, and selling items online. Even hobby income counts if your net earnings exceed $400.
Track income and expenses