Side Income Tax Calculator

Side income from freelancing, gig work, rentals, or a small business comes with different tax obligations than W-2 employment. Understanding the tax impact helps you set the right rates, save appropriately, and avoid a surprise tax bill in April.

Net Side Income formula: Net = Gross Side Income − Business Expenses − Self-Employment Tax − Income Tax on Side Income

Self-Employment Tax (SE tax): SE Tax = Net Self-Employment Income × 0.9235 × 0.153

The 0.9235 factor accounts for the employer-half deduction. The 15.3% rate = 12.4% Social Security + 2.9% Medicare.

What each variable means:

• Gross Side Income — all money received before expenses
• Business Expenses — deductible costs (equipment, software, home office, mileage at $0.67/mile in 2024, internet, professional fees)
• Net Self-Employment Income — gross income minus expenses
• SE Tax — both the employee and employer halves of FICA, since you are your own employer
• Income Tax — depends on your total taxable income and filing status; side income is taxed at your marginal rate

Worked example: Side income: $20,000/year. Deductible expenses: $3,000. Combined federal + state marginal rate: 30%.

Net SE income = $20,000 − $3,000 = $17,000 SE Tax = $17,000 × 0.9235 × 0.153 = $17,000 × 0.1413 = $2,402 SE Deduction (50% of SE tax): $1,201 Taxable side income = $17,000 − $1,201 = $15,799 Income Tax = $15,799 × 0.30 = $4,740 Total taxes = $2,402 + $4,740 = $7,142 Net take-home = $17,000 − $7,142 = $9,858 (49¢ on every dollar after tax at this rate)

Quarterly estimated taxes: The IRS requires quarterly payments if you expect to owe $1,000+ in self-employment tax. Due dates: April 15, June 15, September 15, January 15.

Tax-saving strategies:

• Maximize SEP-IRA contributions (up to 25% of net self-employment income, max $69,000 in 2024)
• Deduct the home office (must be used exclusively and regularly for business)
• Deduct health insurance premiums if self-employed