Quarterly Taxes if Your Side Hustle is Under the Standard Deduction

If your side hustle is less than the standard deduction, you probably still need to pay quarterly taxes. Here’s why.

This post is provided for general information only. Please confirm the details and circumstances of your unique situation with your tax accountant or other appropriate advisor before taking action.

The standard deduction covers all of your income.

The standard deduction isn’t just for your side hustle. You only get one standard deduction that covers all of your income.

If you’re over the standard deduction with your main job, you will owe income taxes on your side hustle.

You need to pay taxes on your side hustle if you earn $400 or more.

Most side hustles are 1099 independent contractor jobs. You must file a tax return and pay taxes if you have $400 or more in 1099 income even if you’re under the standard deduction.

Self-employment taxes apply to the first dollar you earn. The standard deduction only covers your income taxes.

You need to follow the estimated tax rules.

You must pay quarterly taxes according to the following rules.

Based on Current Year Tax ReturnBased on Prior Year Tax Return
AGI up to $150,000 ($75,000 if married filing separate)90% of current year taxes100% of prior year taxes
AGI over $150,000 ($75,000 if married filing separate)100% of current year taxes110% of prior year taxes
To avoid the estimated tax penalty, you must pay one of the above percentages through a combination of estimated tax payments and withholding. Typically, you need to make four equal payments. If you have uneven income, you can use the annualized income installment method.

If you typically get a tax refund, you may be able to skip estimated tax payments if your refund would cover the taxes from your side hustle. You can also increase your withholding at your job to avoid having to make quarterly payments.

You just need to make sure you follow the above rules and owe less than $1,000 when you file your taxes to avoid an estimated tax penalty.

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