If I have a lot of side gigs, none of which separately would add up to more than a couple of thousand dollars if that, one in the hundreds, but I do have expenses tied to them, what can I deduct and should put them all together?

[Katie-P]

The only time you should consolidate them on a single Schedule C is if the activities are closely related. For example, let's say you mow lawns and also offer more comprehensive landscaping services like planting or garden design. Those two activities are related enough where they could reasonably be grouped. But if you are also a pet sitter, that is completely separate.

One thing you need to consider is whether or not these activities are businesses or hobbies. The IRS defines a business as an activity that is carried on with a regular and continuous effort to make a profit. If your side gigs meet this criterion, you can deduct ordinary and necessary expenses associated with that activity. But if the activity is pursued for pleasure or recreation and not for profit, the IRS considers that a hobby. For hobbies, you cannot deduct expenses against the income.

I hope this helps! Feel free to follow up if you have additional questions.

[AmitaR]

It's great that you're thinking about tax deductions for your side gigs! Even small amounts of income can lead to tax obligations and opportunities for deductions. Here's what you need to know:

Do you need to report the income?

Yes, generally. If your net earnings (income minus expenses) from self-employment (your side gigs) are $400 or more, you are required to file a tax return and pay self-employment tax. Even if you earn less than $400 from a single gig, if your total self-employment income across all gigs is $400 or more, you need to report it.

Should you put them all together?

This depends on the nature of your side gigs:

• Similar Activities: If your side gigs are in the "same line of business" or are closely related, you can generally combine their income and expenses on a single Schedule C (Profit or Loss from Business). For example, if you sell handmade crafts on Etsy and also at local markets, these could likely be combined. Another example, if you do Uber and Lyft, they both can be combined.

• Unrelated Activities: If your side gigs are distinctly different types of businesses, you should file a separate Schedule C for each. For instance, if you drive for a rideshare company and also offer freelance graphic design services, those would typically require two separate Schedule Cs.

Even if you file separate Schedule Cs, the net profit or loss from each will ultimately be combined on your Form 1040 to determine your total taxable income. Also, your total self-employment income from all sources will be combined to calculate your self-employment tax.

What can you deduct?

As a self-employed individual, you can deduct "ordinary and necessary" business expenses. This means expenses that are common and accepted in your industry and are helpful and appropriate for your business.

Common deductible expenses for side gigs include:

• Home Office Expenses: If you use a portion of your home exclusively and regularly for your business, you may be able to deduct a portion of your rent/mortgage interest, utilities, and other home-related costs. There's a simplified method and a regular method for calculating this.

• Supplies and Equipment: Anything you purchase specifically for your side gigs, such as tools, software, computers, phones, craft supplies, etc.

• Internet and Phone Bills: You can deduct the portion of these bills used for business purposes. Keep track of your business usage.

• Vehicle Expenses and Mileage: If you use your car for business (e.g., driving for rideshare, making deliveries, going to client meetings), you can deduct either the standard mileage rate (which includes gas, maintenance, and insurance) or the actual expenses (gas, repairs, insurance, depreciation). You must keep detailed mileage logs.

• Marketing and Advertising: Costs for business cards, website hosting, online ads, social media promotions, etc.

• Professional Services: Fees paid to accountants, lawyers, consultants, or other professionals for your business.

• Education and Training: Costs for courses, certifications, or workshops that improve your skills for your current business.

• Business Meals: You can generally deduct 50% of the cost of meals if they are necessary for conducting business (e.g., client meetings).

• Travel Expenses: If you travel for business, you can deduct costs like airfare, lodging, and rental cars.

• Self-Employment Tax Deduction: You can deduct one-half of your self-employment taxes when calculating your adjusted gross income.

• Insurance Premiums: Business insurance, and sometimes health insurance premiums if you qualify.

Important Considerations:

• Record Keeping: This is crucial! Keep detailed records of all your income and expenses. This includes receipts, invoices, bank statements, and mileage logs. You'll need these to support your deductions in case of an IRS audit.

• Estimated Taxes: Since taxes aren't withheld from self-employment income, you'll likely need to pay estimated taxes quarterly to the IRS (and potentially your state) to avoid penalties. A good rule of thumb is to set aside 20-35% of your net income for taxes.

• 1099 Forms: You may receive Form 1099-NEC (Nonemployee Compensation) from clients who paid you $600 or more, or Form 1099-K from payment platforms like PayPal, Venmo, or Cash App if your transactions exceed certain thresholds. However, even if you don't receive a 1099, you must still report all your income.

• Tax Professional: Given you have multiple income streams and expenses, it's highly recommended to consult with a tax professional (like a CPA or Enrolled Agent). They can help you identify all eligible deductions, ensure you're filing correctly, and potentially save you money.

By carefully tracking your income and expenses, you can significantly reduce your taxable income from your side gigs.

Hope this helps @brendageo