What is Self Employment Tax? You Need to Know Before Starting Your Side Hustle!

Mon, 04 May 2026 11:11:43 +0000

**What is Self Employment Tax? You Need to Know Before Starting Your Side Hustle!** Curious about how freelancing, gig work, or side gigs affect your finances? If you’re starting a side hustle in the U.S., understanding self-employment tax is essential—even if the term feels unfamiliar. What is Self Employment Tax? You Need to Know Before Starting Your Side Hustle! is more than jargon—it’s a foundational piece of financial literacy that empowers you to manage income, deductions, and long-term ease of work. Right now, millions of Americans are turning to side income for flexibility and revenue, making clear knowledge about tax obligations not just smart, but necessary. Self-employment tax covers Social Security and Medicare contributions for independent workers, replacing the employer-employee structure. Unlike traditional jobs where taxes deduct automatically, those operating as self-employed bearing the responsibility require proactive planning. This tax impact matters whether you deliver rides through an app, offer consulting services, sell crafts online, or run a freelance writing business. Knowing what it entails ensures you avoid surprises come tax season. While many associate self-employment taxes only with income tax, the reality is broader. Self-emploited individuals pay both the employee and employer portions—15.3% total—on net earnings above a base threshold. This applies even when earnings are modest, making awareness key for budgeting and compliance. The IRS mandates annual filings using Form 1040 and Schedule SE, requiring careful tracking of income and quarterly estimated payments to avoid penalties.