Quick answer: as a self-employed side hustler you can generally deduct expenses that are both ordinary and necessary for your business on Schedule C. Common write-offs include supplies, software, platform and payment fees, advertising, a qualifying home office (the simplified method allows $5 per square foot up to 300 square feet), business mileage (72.5 cents a mile for January through June 2026 and 76 cents from July 1, 2026), the business share of your phone and internet, and education that improves skills for your current business. You may also qualify for the deduction for half of self-employment tax and the qualified business income deduction. Keep receipts and logs for every claim.
The tax on side hustle income is figured on profit, not on everything customers pay you. Every legitimate business expense you record lowers that profit, which lowers both income tax and the 15.3% self-employment tax. That makes deductions one of the most valuable things a side hustler can learn about.
It also makes them one of the most misunderstood. Social media is full of “write it all off” advice that does not match IRS rules. This guide sticks to what the IRS actually allows, explains the conditions behind each deduction and shows what records to keep. For the bigger picture of picking and launching a hustle, see our guide to side hustle ideas, and for the basics of filing, our beginner’s guide to side hustle taxes.
Sources: Internal Revenue Service, Publication 334 (Tax Guide for Small Business), Publication 535 history and current Schedule C instructions, Publication 587 (Business Use of Your Home), Simplified Option for Home Office Deduction page, Standard Mileage Rates page (IR-2025-128 and Announcement 2026-11), Publication 463 (Travel, Gift, and Car Expenses), Publication 946 (How To Depreciate Property), Qualified Business Income Deduction page, Publication 583 (Starting a Business and Keeping Records). General information, not tax advice. Checked October 2026.
The Rule Behind Every Deduction: Ordinary and Necessary
The IRS defines a deductible business expense as one that is both ordinary and necessary. An ordinary expense is common and accepted in your line of work. A necessary expense is helpful and appropriate for the business, though it does not have to be indispensable.
Two more principles matter:
- Business use only. Personal, living and family expenses are not deductible. When something is used for both, such as a phone or a car, only the business portion counts.
- You need proof. The IRS can ask you to show that an expense was real and business-related. Receipts, invoices, bank records and logs are your evidence.
These deductions apply to a business, not a hobby. If you are unsure which category your activity falls into, start there, because hobby expenses are generally not deductible under current law.
15 Common Side Hustle Deductions
1. Supplies and materials
Items you use up in the business, such as craft materials, printer ink, packaging, cleaning supplies for a cleaning service or art supplies for commissions, are deductible in the year you buy them. If you sell products, the cost of the items you sell is handled through cost of goods sold on Schedule C rather than as a regular expense.
2. Software and subscriptions
Design tools, accounting software, website builders, scheduling apps, cloud storage and email marketing services used for the business are deductible. If you also use a subscription personally, deduct only the business share.
3. Platform, marketplace and payment processing fees
Fees kept by marketplaces, freelance platforms and payment processors are a business expense. This one is easy to miss, because forms like the 1099-K report gross payments before fees. Your statements show the fees you paid.
4. Advertising and marketing
Paid social ads, business cards, flyers, promoted listings, a portfolio website and sponsorships of local events are deductible as advertising.
5. Home office
If you use part of your home regularly and exclusively for business, and it is your principal place of business, you may deduct home office expenses. “Exclusive” means that space is not also your guest room or family area. Publication 587 has the full rules, including exceptions for storing inventory and some day care uses.
You can choose between two methods:
- Simplified method. Deduct $5 per square foot of the office, up to 300 square feet, for a maximum of $1,500. No depreciation or expense tracking is needed.
- Regular method. Deduct the business percentage of actual home expenses, such as rent, mortgage interest, utilities, insurance and repairs, plus depreciation if you own. This takes more records but can produce a larger deduction.
For a side hustler with a W-2 job, note that the deduction is limited to the business’s gross income minus other business expenses under either method. The simplified method cannot create a loss.
6. Business mileage and vehicle expenses
Driving for business, such as meeting clients, buying supplies or delivering orders, is deductible. Commuting from home to a regular workplace is not. You can use either actual vehicle expenses or the standard mileage rate. The IRS set the 2026 business rate at 72.5 cents per mile for January 1 through June 30, then raised it to 76 cents per mile for business miles driven on or after July 1, 2026, citing higher fuel prices. Parking fees and tolls for business trips are deductible on top of the mileage rate.
You need a log showing the date, destination, business purpose and miles for each trip. A notebook, spreadsheet or mileage app all work if they are kept at the time of travel.
7. Phone and internet
Deduct the business-use percentage of your cell phone and home internet. If you use your phone 30% for the hustle, deduct 30% of the bill. Under IRS rules, the first landline to your home is treated as personal, but a second line used only for business is deductible.
8. Equipment and tools
Cameras, laptops, sewing machines, power tools and similar items used in the business are deductible, either all at once or over several years. The de minimis safe harbor election lets many small businesses deduct items costing $2,500 or less per item or invoice immediately. Larger purchases may be expensed under Section 179 or depreciated; Publication 946 explains the options.
9. Professional services
Fees paid to an accountant, tax preparer, bookkeeper or attorney for business work are deductible. Tax prep fees for the business portion of your return count as well.
10. Education and training
Courses, workshops, books and industry memberships that maintain or improve skills used in your current business are deductible. Training that qualifies you for a new line of business generally is not.
11. Business insurance
Premiums for general liability, professional liability, business property coverage and a home-business rider are deductible.
12. Licenses, permits and registration fees
Local business licenses, professional license renewals, sales tax permit fees, DBA filings and LLC state fees are business expenses.
13. Business meals and travel
Meals with a client or business associate are generally 50% deductible when business is discussed and the cost is not lavish. Entertainment, such as concert or game tickets, is not deductible. Overnight travel away from your tax home primarily for business can include airfare, lodging and 50% of meals. Publication 463 covers the details.
14. Bank fees and interest
Fees on a business bank account and interest on a business loan or a credit card used only for business are deductible. Running everything through a separate bank account for your side hustle makes these easy to identify.
15. Startup costs
Expenses you pay before the business opens, such as market research or initial advertising, are treated as startup costs. You can generally deduct up to $5,000 in the first year, reduced dollar for dollar once total startup costs exceed $50,000, and amortize the rest over 180 months.
Deductions That Are Not on Schedule C
A few valuable tax breaks for side hustlers are claimed elsewhere on your return:
- Half of self-employment tax. You deduct 50% of your self-employment tax as an adjustment to income on Schedule 1. It lowers income tax, not SE tax.
- Self-employed health insurance. If you pay for your own health insurance and are not eligible for an employer-subsidized plan, you may deduct premiums, limited to your net self-employment income. Side hustlers covered by an employer plan at their main job usually cannot use it.
- Retirement contributions. Contributions to a SEP IRA, solo 401(k) or SIMPLE IRA based on self-employment income are deductible within IRS limits.
- Qualified business income (QBI) deduction. Many sole proprietors can deduct up to 20% of qualified business income. The One, Big, Beautiful Bill made the deduction permanent, and for tax years beginning after 2025 it adds a minimum deduction of $400 for taxpayers with at least $1,000 of QBI from an active business they materially participate in, according to the IRS. Income limits and other rules apply.
What You Cannot Deduct
- Personal expenses, such as everyday clothing that is suitable for regular wear, groceries or family vacations.
- Commuting between home and a regular workplace.
- Entertainment expenses.
- Fines and penalties paid to a government.
- Political contributions.
- The value of your own time. You cannot pay yourself a deductible “wage” as a sole proprietor.
- Hobby expenses, under current law.
Records to Keep
IRS Publication 583 explains that you should keep records that support each item of income and expense on your return. In practice, that means:
| Expense | Records that support it |
|---|---|
| Purchases and supplies | Receipts or invoices showing date, amount, vendor and what was bought |
| Mileage | A contemporaneous log of date, destination, purpose and miles |
| Home office | Measurements of the space, photos and, for the regular method, bills and rent or mortgage statements |
| Phone and internet | Bills plus a reasonable method for the business-use percentage |
| Meals and travel | Receipts, plus who attended and the business purpose |
| Equipment | Purchase receipt, date placed in service and business-use share |
A simple system makes this easy. Our guide to tracking side hustle income and expenses shows the spreadsheet columns and categories to use. The IRS generally says to keep records for at least three years after filing, and longer in some situations, such as for property records.
How Deductions Change Your Tax Bill
Here is a hypothetical example to show the effect. Suppose a hustle brings in $15,000 in gross receipts. If its owner records $4,000 of legitimate expenses, taxable profit drops to $11,000. Self-employment tax falls by roughly $4,000 x 0.9235 x 0.153, or about $565, and income tax falls as well, by an amount that depends on the owner’s bracket. That is why tracking even small costs adds up.
Deductions also matter when you set prices. Knowing your real costs helps you charge enough to earn a profit, which our guide to pricing side hustle services covers in detail.
Common Deduction Mistakes
- Missing platform fees because the 1099-K shows gross payments.
- Claiming a home office for a shared space like a dining table.
- Estimating mileage at tax time instead of logging it as you go.
- Deducting 100% of a mixed-use phone or car.
- Writing off personal purchases that are only loosely connected to the business.
- Forgetting the deductions outside Schedule C, such as half of SE tax and QBI.
Frequently Asked Questions
Frequently Asked Questions
What can I write off for my side hustle? Ordinary and necessary business expenses, such as supplies, software, platform fees, advertising, a qualifying home office, business mileage, the business share of your phone and internet, insurance, licenses and professional fees.
What is the 2026 mileage rate for a side hustle? The IRS business standard mileage rate is 72.5 cents per mile for business driving from January 1 to June 30, 2026, and 76 cents per mile for business driving on or after July 1, 2026.
Can I claim a home office if I have a full-time job? Yes, if part of your home is used regularly and exclusively for the side business and is its principal place of business. The deduction cannot exceed the business's income after other expenses.
Can I deduct expenses if my side hustle lost money? A real business can deduct expenses even in a loss year, and a loss can offset other income subject to limits. Persistent losses may raise the question of whether the activity is a business or a hobby.
Do I need receipts for every expense? You need records that prove each expense. Receipts are best; bank statements alone may not show what was purchased. Mileage requires a log.
Is the QBI deduction available to side hustlers? Many sole proprietors qualify for the qualified business income deduction of up to 20% of QBI, subject to income limits. For tax years after 2025 there is also a $400 minimum deduction for eligible active businesses with at least $1,000 of QBI.
The Bottom Line
Side hustle deductions reward good records. Track supplies, fees, mileage and other business costs as they happen, claim only the business share of mixed-use items and remember the deductions outside Schedule C. Done right, deductions lower both your income tax and self-employment tax without inviting trouble. When in doubt about a specific expense, IRS Publication 334 or a tax professional can confirm it.