Pay Zero Taxes on Your Side Hustle? Uncover the Legal Loopholes!

Here's how you can legally pay zero or no taxes on your side hustle income.

Now, I know what you might be thinking – the idea of paying little to no taxes on your side business income might seem too good to be true. But stick with me!

We will explore some completely legal and smart strategies to minimize your tax burden, which can make a huge difference in how much you keep from your hard-earned side hustle income.

And, I’ll walk you through a real-world example.

Real quick. If you have a side hustle, you may or may not receive a 1099 at the end of the year. But regardless, the income you earn from your side hustle is taxable, and you need to report it on your tax return. Typically on Schedule C of your personal tax return.

Also, keep in mind that most accountants are very good, but during tax time, they’re swamped and won’t often spend too much time helping you to reduce your taxable income. That’s why it’s really important to understand what you can deduct against your side hustle, which reduces your taxable income.

So here’s what we’ve got:

Let’s say you’ve got a side hustle that’s bringing in an extra $1000 per month. That’s $12,000 for the year.

We’ll whittle this down using legal tax strategies.

1. Business-related Car Mileage: 300 Necessary driving business miles for your side hustle times at 67 cents per mile is $200 per month or 2400 for the year.

2. Home Office Deduction: Let’s also say you have a home office that qualifies for the home office deduction. Using the simplified method, that can be around… $1500 for the year.

3. Business Meals: For your side hustle, you can also write off business meals as long as they relate to your side hustle and are for business purposes. For example, these are business meals with clients, partners, or for sales purposes. Let’s say you have a business meal once a month at $100 each. That’s another $1200.

4. Business Utilities: Naturally, you probably have a cell phone you need to use for your side hustle. But it’s combined with your personal phone plan. So what you want to do is figure out your business use percentage and then you can deduct that.

So let’s say your monthly phone bill is $150 per month, times 12 months, that's $1800. Half of that for the business use is $900.

5. Office Supplies: Let’s say that you need to buy things for your side hustle, like paper, pencils, organization, and tech supplies. That’s easily another $100 per month or $1200 for the year.

6. Computer and Technology Expense: Maybe you need a business computer or tablet, maybe software and apps. That could be another $1000 in computer and technology expenses for the year.

7. Contract Labor: Maybe you needed to hire an independent contractor to help you with some of your side hustle work. That could be another $1000 for the year.

8. Professional Fees: Maybe you hire a tax professional for your bookkeeping and taxes. There’s another $1000.

9. Rent or Lease Payments: Maybe you had to rent some equipment or storage space for your side hustle. That could be another $1000.

10. Misc: And finally, maybe you had some travel expenses, bank charges, license fees, insurance, and that all totals $800 for the year.

Let’s do the math…

$ 12000 (Total Revenues)

1. 2400 Business Miles
2. 1500 Home Office
3. 1200 Business Meals
4. 900 Phone
5. 1200 Office Supplies
6. 1000 Computer Expenses
7. 1000 Independent Contractor
8. 1000 Professional
9. 1000 Rent/Storage
10. 800 Misc
━━━━━━━━━━━━
$ 12000 (Total Expenses)

$ 0 (Net Income)

That’s exactly $12000 in legitimate business expenses that effectively wipes out your side hustle income!

Was this great or what?

Seriously, I’m all about not paying any more in taxes than you legally owe.

You might even have more business expenses and have a net loss for your side hustle, which further reduces your taxes.

By the way, I have a full course on how to file taxes for your side hustle. This is for freelancers, online sellers and gig economy workers. And covers all of this, and many other questions you might have regarding paying and filing taxes for your side hustle. It’s great! You can check it out here.

Just keep in mind that your side hustle business expenses need to meet the IRS guidelines of “ordinary and necessary”.

I hope that makes sense. Reach out in case you have any questions.

Thanks for reading and see you in my next blog post!