This transcript was generated from the episode audio and may contain minor errors.
[Music]
Hey there, what's up? Thank you so much for listening. My name is Chris Guillebeau, so glad you're out there. Wow, you know, so much continues to happen in the world. I don't know what I could say about that.
I mean, do you just like keep refreshing the news all the time or do you just kind of keep your head down? Maybe it's somewhere in the middle. I think whatever the answer is for you, part of that answer is, you know, what can I do for myself? How can I do what is within the limited scope of my control, you know, to look after myself, try to build this business, try to create more security for myself so that I can do more things for others, right? These things are all connected.
Now with that inspirational pep talk out of the way, let's talk about something really sexy, taxes. Okay, right, you know, it is tax, okay. A little bit of a let down there, but hey, actually this is good because we're gonna talk about saving you money. Love them or hate them when it comes to taxes. Well, I don't think anybody actually loves them.
But the good news is when you operate a side hustle, you may be able to deduct a lot of expenses from your personal tax return. So today's caller is wondering about some examples. I will give him some. What are some common items you can deduct? And can you do this even when you're starting up and the business isn't profitable?
Now this advice relates primarily to listeners in the US. But if you live elsewhere, you may be able to take similar deductions. Of course, consult your own advisor to make sure you get the most accurate and relevant info. Let's talk today about tax deductions for side hustlers. [Music]
Hey Chris, this is Kevin from Tacoma.
And I've been listening to your show from the beginning and I'm hoping to launch a side hustle soon. My question is, what are some common tax deductions for side hustlers? I know you can't give tax advice, but I'm wondering something. Are there some common tax deductions when operating a side business? I started thinking about this when I heard that actors can deduct their outfits and even their own haircuts.
What can we write off? Thanks, and I look forward to hearing from your response. Big fan, thanks. [Music]
Kevin, thank you so much for listening from Tacoma. I'm a big fan of you as well.
And indeed, you can deduct all kinds of stuff. And this is one really good thing. I should talk about it more actually. I mean, mostly I wanna help people start a side hustle because I want them to make more money. Like that's the main goal.
But it is true that a benefit of a side hustle is that you can deduct a lot of common expenses. And so you'll actually end up saving money in addition to whatever money you make. And to that point that I mentioned in the introduction, can you take deductions even when you're just starting out? You can do that too. Now you can't do this forever.
If you have a loss every year in the same business on your tax return, then the IRS considers that a hobby, like not a business, right? And by the way, you should too. If you're out there and you're like, I'm losing money every year, then that's not a good business for you, aside from the whole tax deduction thing. But in many cases, if you have a small loss as you're getting going, or just a loss of any kind really in the first year or so, sometimes the second year, it's not unusual in the eyes of the government. So those expenses can be deductible.
So here's a list of some common deductions with that caveat again, of be sure to consult your own advisor. Now, generally speaking, contract labor, any services that you pay for, that is almost always gonna be deductible. Including, for example, that person you pay $100 on Upwork to make your logo, or the task rabbit you hire to complete some administrative task, or somebody on Fiverr, or whatever it is, any kind of contract labor that you're paying for. Also those business cards that you had printed, or any supplies in general, supplies broadly speaking, like anything that you are spending to operate your business or to start that side hustle, anything that helps you keep better records, or begin the process of finding customers and clients, anything you spend on your website, anything you spend for online services associated with your website. I mean, these days, a lot of us are paying for a lot of different subscriptions.
Well, now if you start using those subscriptions for business use, I mean, I pay for Dropbox every month, just as one example, I pay for a lot of services every month, probably too many. But most of those things are deductible for me, and they will be for you as well, if you have a side hustle. You can also deduct mileage that you drive in your vehicle. In 2019, the rate was 58 cents a mile. That's the deduction you can take if you don't wanna actually keep up with all of the maintenance and the actual cost for the fuel and everything, it's usually much easier to just take that rate.
This rate changes each year, that's why I mentioned 2019, it was 58 cents a mile. Do note that if you're deducting mileage for business errands, you need to keep good records. You can also, and this is simpler for me, you can also deduct Uber or Lyft rides. You just set up a business profile in your account, which is free, and remember to choose whether the ride is business or personal before each ride. It's really simple, there's a drop down menu.
Every time I call an Uber or Lyft, I just say, is this a business or personal ride? And they will automatically keep a record for you that you can access at any time. Let's see, what else? So I mentioned supplies, but also the cost of your home office, including a portion of your rent or mortgage. Now this is big.
This is one of those things that they use a formula for. It is a little bit complex, so you want to spend some time studying the details before you just add that to your tax return, but it can be significant. And then reasonable travel costs, if you are traveling at all for work, if you're going to a conference by work, I mean your side hustle, not your day job. If you're going to a conference, if you are going to a client meeting in another city, if you are, you know, whatever it is, some reasonable research trip, that can count too. And then also as part of that, 50% of meals, 50% of meals that are spent in some kind of business purpose.
Those are some common deductions. Depending on what your side hustle is or what your business is, what it becomes, you can deduct some other stuff too, like the example of actors, you know, deducting their haircuts and their clothes, you know. There could be some other options depending on what you're doing. This is probably one of the only fun things about taxes, you know, when you're learning about this process, to see, oh, what can I actually deduct? I mean, that's exciting at least, right?
Or if it's not exciting, at least it's not like, here's a list of all the taxes I have to pay. So Kevin, anybody else out there? I hope that is helpful. Thank you again. Listeners, if you've got a question, come to sidehustleschool.com/questions.
We are featuring them throughout the year, along with updates from other listeners as they launch their projects. Until next time, my name is Chris Guillebeau, this is Side Hustle School. [Music]
From the Onward Project.
