5 Tax Deductions Side Hustlers and Gig Workers Always Miss
Written by
Jake Safane
Edited by
Angela Corry
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
With this year’s tax filing deadline quickly approaching, it’s important for self-employed individuals to get a clear sense of what they may owe and how they can minimize their tax bills. Even if you don’t consider yourself self-employed, if you have a side hustle or do gig work, then you may need to file a Schedule C to report business income as part of your overall tax return.
When doing so, there are several deductions to be mindful of, such as the following:
The Qualified Business Income Deduction
Also called QBI, the Qualified Business Income Deduction stems from the 2017 Tax Cuts and Jobs Act, providing a deduction for up to 20% of qualified business income.
“QBI is the net income, gain, deduction, and loss from your business minus capital gains and losses, some dividends, interest income, wage income, and others,” explained Stephen A. Weisberg, principal attorney and founder at The W Tax Group.
There are also income limitations — “for 2024, your taxable income must be less than $191,950 or $383,900 for joint filers. In 2025, the threshold increases to $197,950 or $394,600 for joint filers,” he added.
While this deduction should be automatically captured by most tax software, it’s worth planning ahead for. Many side hustlers and gig workers don’t realize that they’re able to deduct this, which affects their estimated taxes.
The Deduction for Health Insurance Premiums
If you don’t have access to health insurance through an employer and buy it on your own, that could lead to substantial tax savings.
“When you’re self-employed, you can deduct medical expenses, but you can also deduct health insurance premiums, even if you don’t itemize,” said Weisberg.
This deduction “also applies to Medicare premiums,” he added.
Considering that health insurance can cost several thousand per year, that could be a significant way to reduce your taxable income. Keep in mind, that eligibility rules can be a little complex, such as if your spouse has access to employer-sponsored insurance.
The Depreciation Deduction
Being a side hustler or gig worker, it might not seem like you have much access to the depreciation deduction, which is often used by larger businesses to write off the declining value of assets like machinery.
However, you might be surprised what you can deduct in this regard. In particular, “under Section 179, you can deduct up to $1.22 million in all qualifying purchases right away,” rather than just taking the depreciation as it occurs each year, explained Weisberg.
“For example, if you’re a photographer who bought a $4,000 camera, you can deduct the full $4,000 in the first year instead of having to write it off as depreciation over time,” he said.
Granted, there are certain restrictions, like not deducting more than your business income, but in general, this could be a helpful deduction.
Self-Employment Tax Deduction
Another commonly missed tax deduction relates to the self-employment taxes you have to pay as a side hustler or gig worker.
“When you’re self-employed, you pay 15.3% in self-employment tax because you’re paying both the employer and the employee-required Social Security and Medicare. However, you’re allowed to deduct half of that on your return,” said Weisberg. “For example, if your self-employment tax is $15,000, you can deduct $7,500 on your tax return.”
As with QBI, this deduction should automatically be accounted for by any decent tax software, but you don’t want to miss it when figuring out your estimated taxes. So, when calculating your Q1 2025 estimated taxes, for example, you might want to calculate what you owe with this deduction worked in.
But you don’t want to overestimate the effects of this and other deductions either. As Weisberg added, many people end up paying penalties due not paying or properly accounting for estimated taxes. So, the clearer and more proactive you can be about this, the better off you likely are.
Retirement Contributions
Retirement contributions can be tax deductible in many situations, but being a side hustler or gig worker could give you access to some new ways to save in this regard.
“When you’re self-employed, you can contribute much more than employees to retirement plans using a SEP IRA or a Solo 401(k), which you can deduct on your tax return,” said Weisberg.
Lower-income earners may also qualify for an additional tax credit for retirement contributions, known as the Saver’s Credit — up to $1,000 for single filers. This could particularly be beneficial for someone who has some financial flexibility, like if you’re living off savings while starting a new business, and the relatively low income in the first year of operating enables you to maximize retirement deductions and credits.
“For example, if you contribute $15,000 to a SEP IRA, you can deduct that amount on your return, but you can also get a $1,000 Saver’s Credit, assuming you qualify under the income guidelines,” noted Weisberg.
More From GOBankingRates
