Side Hustle Tax Estimator

Two separate taxes, stacked. Self-employment tax comes first: your annual profit is multiplied by 0.9235 — the IRS only taxes 92.35% of net earnings, which approximates the employer half you would otherwise get to deduct — and then by 15.3%, being 12.4% Social Security plus 2.9% Medicare. On $18,000 of annual profit that is about $2,543. Income tax comes second: annual profit times the bracket you picked, or $3,960 at 22%.

Together that is $6,503 a year, or $1,626 a quarter — about 36% of profit. That 36% is the number that catches people out. Side income is not taxed like a paycheck. It is taxed like a paycheck plus the employer's half of payroll tax, which you are now paying yourself.

It applies your marginal bracket to every dollar of profit and takes no deductions, so it reserves slightly too much on purpose. The biggest omission is the deduction for one-half of self-employment tax, which reduces the income your bracket applies to. Folding that in drops the default estimate from $6,503 to roughly $6,224 — about $280 of over-reserving a year. It also ignores the QBI deduction, ordinary business expenses, and the Social Security wage base cap, all of which push the real bill down further.

Over-reserving is the right direction for a tool like this. A quarter where you set aside too much is an inconvenience. A quarter where you set aside too little is a penalty.

State income tax is not in here at all. Depending on where you live that is another 3% to 10% on top, and a few cities add their own on top of that. If your state taxes income, add it to the bracket you pick rather than trusting the headline percentage.

The marginal-rate assumption also cuts both ways. Applying 22% to every dollar is roughly right when side income stacks on top of a W-2 salary that has already filled the lower brackets, which is the common case. If the side hustle is your only income, the real bill is lower, because your first dollars are taxed at 10% and 12%. If the side income is big enough to push you into the next bracket partway through the year, it is higher.

Treat the quarterly figure as a set-aside target, not a filing. The IRS generally expects estimated payments in April, June, September, and January once you expect to owe $1,000 or more for the year.