After three years of delays, the $600 1099-K threshold finally took effect for 2025 tax year reporting. Anyone who took payments through PayPal, Venmo (business), Stripe, Cash App, Etsy, eBay, Uber, or DoorDash will receive a 1099-K if they crossed $600. The IRS gets the same form. There is nowhere to hide.
This guide covers what you owe, the deductions that matter, and how to file Schedule C without losing a Saturday.
What changed in 2026
- 1099-K threshold dropped to $600 — from the previous $20,000 / 200-transaction floor.
- Personal Venmo and PayPal transactions are excluded — but only if labeled "Friends and Family." Anything tagged "Goods and Services" counts.
- Standard mileage rate is 70 cents for 2025 driving, useful for rideshare and delivery drivers.
How side hustle taxes work
- Bullet 1: All business income is taxable, regardless of whether you receive a 1099.
- Bullet 2: Schedule C reports gross income and deducts expenses to find net profit.
- Bullet 3: Net profit flows to Form 1040 as ordinary income and to Schedule SE for self-employment tax.
- Bullet 4: SE tax is 15.3% (12.4% Social Security + 2.9% Medicare) on net earnings up to $168,600.
- Bullet 5: You can deduct half of SE tax as an above-the-line adjustment.
1. Reseller or marketplace seller — best for Etsy, eBay, Poshmark
Track cost of goods sold, listing fees, shipping, and packaging. Most resellers operate at much lower margins than they realize once everything is counted.
The trade-off: inventory accounting matters. Either FIFO or specific identification — pick one and stick with it.
2. Rideshare or delivery driver — best for Uber, Lyft, DoorDash, Instacart
Mileage is everything. At 70 cents per mile, a driver doing 15,000 miles writes off $10,500. Most drivers under-report miles because the apps only track on-trip distance.
The catch: you can use either standard mileage OR actual vehicle expenses, not both. Standard mileage usually wins for low-cost vehicles. Actual expenses can win for new or expensive ones.
3. Freelancer or consultant — best for Upwork, Fiverr, direct clients
Home office, software, professional development, business meals (50%), client travel, and a portion of phone and internet. The QBI deduction (Section 199A) can shave 20% off taxable business income.
The catch: high earners (over $241,950 single in 2025) face QBI phaseouts for service businesses.
Comparison: side hustle tax tools in April 2026
| Tool |
Price |
Best for |
Catch |
| FreeTaxUSA |
$0 federal + $15 state |
Cheapest Schedule C |
No live support |
| TurboTax Self-Employed |
$129+ |
Bundled QuickBooks SE |
Expensive |
| H&R Block Self-Employed |
$115+ |
In-person backup option |
Mid-tier features |
| TaxSlayer Self-Employed |
$69+ |
Best price for full features |
Less polished UX |
| Cash App Taxes |
Free |
Simple Schedule C |
No multi-state |
Common mistakes to avoid
Treating 1099-K gross as taxable income. The 1099-K reports gross payments. Refunds, fees, and shipping reimbursements aren't profit. Reconcile before filing.
Skipping quarterly estimates. Side hustles often trigger underpayment penalties. If you'll owe more than $1,000, pay quarterly using safe harbor.
Mixing personal and business in one PayPal account. Open a separate business account or at minimum tag transactions consistently. Saves hours at tax time.
FAQ
What if my 1099-K is wrong?
Contact the issuer for a corrected form. If they refuse, file with the correct numbers and attach an explanation.
Do I need an LLC?
No. Schedule C works for any sole proprietor. An LLC adds liability protection, not tax advantages.
What if I made under $600?
You still owe tax. The 1099-K threshold is just when the platform must report — your obligation to report income is unchanged.
Where to go next
For related guides see Self-employed tax deductions in 2026, Quarterly estimated taxes 2026, and AI side hustles to make money in 2026.