5 Hidden Costs of Side Gigs

shapecharge / iStock.com

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

Side hustles are a great way to make ends meet when your full-time job isn’t cutting it. Your side gig can refer to any active effort to earn extra income outside of your primary job, along with passive income streams. Common side gigs include delivery driving, dog walking, freelance writing or selling your own creations.

Given these times of economic volatility and the rising cost of living, it’s no surprise that a growing percentage of Americans are participating in popular side hustles. However, not every attempt to make extra cash is successful. It’s important to choose your side hustle carefully and go into your new venture with your eyes wide open. Here are five hidden costs of side gigs to take into consideration.

Time

Every business venture takes time, not only to establish but also to operate. Make sure before you dip your toe into taking on a side hustle that you have the time you need to dedicate to it. You’ll have to fit your side gig in between your full-time job and other responsibilities.

You should also make sure you are earning enough money for the time you are spending. Some people with side hustles easily spend 10-20 hours a week on them. Therefore, the more time you put into a side hustle, the more money you should make.

When you start, one way to figure out how many hours you have to dedicate to extra employment is to keep track of your schedule for a few weeks. The time you spend watching TV or scrolling through social media accounts could become time spent working on your side gig.

Startup Costs

Many people dream of turning their hobby into a side hustle. However, turning your favorite pastime into a business typically takes startup capital. This is especially true if you want to expand your customer base outside of just your friends and family or selling your goods on Facebook Marketplace.

It can take thousands of dollars and more than just a bit of word-of-mouth to get even a low-overhead gig up and running. So, if you’re starting your own business, you may not see a profit for quite some time. It’s important to assess your finances and decide whether or not the long game is right for you.

Taxes

Yes, you still have to pay taxes on side gigs. The IRS requires you to file taxes if you make $400 or more, and remember that filing taxes for a self-owned or freelance business is different from filing taxes for a full-time job. Here are a few key takeaways you should know about taxes on side gigs:

• In 2025, if you earn more than $400 you’re required to file a tax return for even passive income. 
• This is to pay a self-employment tax of 15.3% of your net earnings.
• It also covers Social Security of 12.4% and Medicare of 2.9%.
• If your side hustle is working freelance for an outside company, you’ll pay a self-employment tax and receive a 1099 form at the end of the year.
• This means your employer isn’t responsible for withholding taxes from your paycheck, so you’ll need to pay these taxes quarterly or in one lump sum at the end of the year.

Maintenance Costs

Depending on which lucrative side gig you are hoping to conquer, you may encounter maintenance costs that you’ll need to factor ahead of time, or risk being caught with a bill you can’t pay. The following are some examples of sneaky costs you may have not considered:

• If you’re using your car to drive for an app, you’ll have to pay for gas, repairs, inspections and regular cleanings. Plus, depending on where in the country you’re located, you may need to apply for a special license known as a TLC driver’s license, a TLC vehicle renewal, and a yearly commercial motor vehicle tax. Altogether these fees can add up to around $1,000 per year.
• If you’ve decided to invest in a rental property as your side hustle, you’ll need to factor in money for repairs, landscaping and taxes. According to Homee.com, rental owners should set aside 50% of the rent each month for repairs, maintenance, taxes and insurance.
• Even people who’ve transformed hobbies into side hustles will need to factor in the cost to replace supplies.
• If you’re selling your wares via an e-commerce platform, you’ll have listing fees, transaction fees and shipping fees.

Burnout

Making more money shouldn’t come at the sacrifice of your mental or physical health. Keep in mind that juggling multiple jobs along with everyday life responsibilities can be a recipe for burnout. If you’re feeling overwhelmed or lackluster about your side gig, it may be time to reassess.

If the initial reason you had for pursuing a side gig still stands, reframe the problem or reorganize and prioritize your approach. If it doesn’t, it may be time to say goodbye to your second gig.

Share This Article: