Top 7 Tax Deductions You Can Claim for Your Side Hustle in 2025

More people than ever are earning extra income through side hustles — whether driving for Uber, selling on Etsy, freelancing, or offering local services. But many side hustlers leave money on the table by missing out on tax deductions they’re entitled to claim. This guide breaks down the top 7 tax deductions for side hustlers in 2025, so you can keep more of what you earn.

Why Tax Deductions Matter for Your Side Hustle

If you earn money outside of a regular job, the IRS considers you self-employed for that income. That means you’re responsible for reporting it — but also eligible to deduct ordinary and necessary expenses from your taxable income. These deductions lower your profit, and therefore reduce the income tax and self-employment tax you owe.

Here are the most common and valuable deductions side hustlers should know for 2025:

1. Home Office Deduction

If you use a dedicated space in your home regularly and exclusively for your side hustle, you may qualify for the home office deduction. This applies whether you rent or own your home. The space doesn’t have to be a separate room — it could be a portion of a room — but it must be used solely for your business activities.

For 2025, you can choose between:

• Simplified option: $5 per square foot, up to 300 square feet ($1,500 maximum).
• Actual expense method: Deduct a percentage of your actual rent/mortgage interest, utilities, property taxes, and insurance, based on the square footage of your office relative to your home.

Keep records of your workspace dimensions and your household expenses to substantiate your deduction.

2. Mileage and Vehicle Expenses

If you use your car for your side hustle — delivering food, driving passengers, traveling to client meetings, or picking up supplies — you can deduct the business portion of your vehicle costs.

For 2025, you can choose between:

• Standard mileage rate: The IRS allows you to deduct a flat rate per business mile driven (rate updated annually — check the IRS mileage rates).
• Actual expenses: Deduct the business percentage of gas, maintenance, insurance, registration, and depreciation.

Use a mileage log (paper or app) to track your business miles accurately. Commuting from home to a regular job does not count — only business-related travel for your side hustle.

3. Supplies and Equipment

Any supplies and tools you buy to run your side hustle are deductible. This includes items you use up (like packaging, office supplies, printer ink) and equipment that lasts longer (like a laptop, camera, or tools).

For higher-cost items, you may have to depreciate the expense over several years, though many smaller purchases can be deducted in full in the year you buy them. Check with a tax professional or the IRS rules for Section 179 and bonus depreciation options on larger purchases.

4. Internet and Phone

Side hustlers who use their internet and phone for business purposes can deduct the business portion of these expenses. If you have a separate phone line or internet service for your side hustle, you can deduct it entirely. If you share with personal use, calculate the percentage used for business and deduct that portion.

For example, if you use your smartphone 50% for business and 50% personal, you can deduct half of your phone bill. Keep detailed records to justify your estimate.

5. Professional Services

If you hire professionals to help you with your side hustle — such as an accountant, attorney, web designer, or business consultant — their fees are fully deductible as business expenses.

This also includes fees paid to online platforms or services that support your business, like bookkeeping software, website hosting, or payment processing fees from platforms like PayPal or Stripe.

6. Marketing and Advertising

Any money you spend to promote your side hustle is deductible. Examples include:

• Business cards, flyers, or print ads.
• Website design and maintenance.
• Social media advertising (Facebook, Instagram, LinkedIn, etc.).
• Sponsorships or promotional merchandise.

Track these expenses carefully — even small marketing efforts can add up and save you money at tax time.

7. Education and Training

If you take courses, attend workshops, or purchase materials to improve skills related to your side hustle, these costs are deductible. Examples include:

• Online courses in your field.
• Books or subscriptions that enhance your business knowledge.
• Seminars or industry conferences (including travel and registration fees).

The key is that the education must relate directly to your current business and help you maintain or improve your skills — not prepare you for a different trade or hobby.

Tips for Claiming Deductions

To make the most of your deductions and avoid IRS problems:

• Keep detailed records and save all receipts.
• Use a separate bank account for your side hustle to simplify tracking income and expenses.
• Use accounting software or spreadsheets to organize your finances.
• If your expenses are higher than your income for the year, be prepared to show that you’re operating with a profit motive — not just as a hobby.

The Bottom Line

Running a side hustle comes with tax responsibilities — but also opportunities to save through deductions. By understanding and claiming these common deductions, you can lower your taxable income and keep more of what you earn. Always consult the latest IRS guidelines or a tax professional to ensure your deductions are valid and properly documented.

Disclaimer: The information provided in this blog post is for informational purposes only and should not be construed as legal, tax, or accounting advice. Tax situations are often complex and highly specific to the individual or business. You should contact a qualified tax expert directly to discuss your particular circumstances. Nothing herein is intended to, nor does it, create an attorney-client or advisor-client relationship. For individual guidance, please contact us directly.