If you live in sunny South Miami, you might want to use your skills or hobbies to make extra money. However, it is important to know the tax consequences before you start selling seashells on the beach or teaching tourists how to salsa.
If you live in or own a business in South Miami, you should talk to an accountant in South Miami to make sure you are following the tax rules and getting the most out of your benefits. Let us look at how the money you make from a side job might affect your tax bill.
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Side hustle earnings are taxable income.
The IRS counts all of the money you make from your side job as taxed income, no matter how little or how much. In other words, you will have to include it on your tax return along with your other pay.
There are no special tax breaks for people who have side jobs. Your regular income tax rate applies to the extra money, and it can change based on how much extra money you make from your side job and your normal job together.
Keep track of everything.
For tax reasons, you need to keep good records of how much money you make and spend from your side job. When it is tax time, your best friends are bills, receipts, and bank records.
These records help you correctly report your income and get the most out of any benefits you may be able to claim, which lowers your overall tax bill.
Maximize your tax deductions.
The good news is that you can deduct some business-related costs, even though the money you make from your side job is taxed. When you take deductions, they take money away from your income, which lowers the amount of taxes you owe.
Some common tax breaks for people who work side jobs are:
- Business supplies: Business goods are the costs of running your side business, like getting craft tools or paid software for your online business.
- Travel expenses: Costs of travel that are directly tied to your side job, like going to industry events or driving to meet clients. Please keep in mind that going to and from work does not count.
- Home office costs: If you set aside a room in your house to work on your side business, you may be able to claim some of your rent or mortgage, utilities, and internet fees. However, the IRS has certain requirements.
Remember that it is important to keep good records in order to claim these deductions.
Do not forget the self-employment tax.
People who work extra jobs often forget to pay self-employment tax. This includes the Social Security and Medicare premiums that companies usually pay for their workers.
You have to pay both the company and employee share of these taxes since you are your own boss and have a side job.
The good news? The tax rate for people who work for themselves is less than the tax rate for workers, which includes Social Security and Medicare. But it only applies to the money you make from your side job after you take out the business expenses.
The tax on self-employment can be a big chunk of money. If you want to avoid a bad surprise come tax time, you might want to set aside some of the money you make from your side job just for this tax.
If you know about these tax effects, you can avoid unpleasant shocks and make the most money from your South Miami side job. Remember that keeping good records and getting help from a tax expert if you need to can make tax time go more smoothly and help you keep more of your hard-earned money.
