Turning Your Side Hustle Into a Business in 2025 — Why It’s Time to Get Serious About Taxes

That side hustle you’ve been grinding on—selling online, doing gigs, consulting, freelancing—it’s more than a “little extra cash.”

According to the IRS, if you’re pursuing profit, you’re already running a business (IRS.gov). And once you treat it like a business, you unlock powerful tax strategies, deductions, and opportunities to build real wealth.

The difference is mindset and organization.

Side Hustle vs. Business — What the IRS Says

The IRS looks at whether your activity is engaged in “with a reasonable expectation of profit.” If it is, it’s a business. If not, it’s considered a hobby, and you can’t deduct expenses.

Key takeaway: If you’re making money and investing effort, the IRS likely sees you as a business—even if you’re just starting out.

(IRS.gov – Is it a Hobby or a Business?)

How Much Have You Spent on Your Side Hustle?

Be honest—how much personal money have you already spent on your side hustle?

• Equipment?

• Supplies?

• Software subscriptions?

• Marketing?

• Driving miles to gigs or clients?

If you’re not set up as a business, those dollars are just gone. But as a business, those same expenses can become deductions—reducing your taxable income and lowering your tax bill.

What You Gain By Getting Organized

Once you shift from “hustle” to “business,” you can:

• Deduct business expenses (home office, internet, phone, travel, supplies, mileage).

• Track startup costs and write them off as you grow.

• Separate personal vs. business finances (a huge step for clarity and growth).

• Access tax strategies like the Qualified Business Income (QBI) deduction.

• Build credit, qualify for business loans, and set yourself up for an LLC or S-Corp down the road.

It’s about more than saving money—it’s about building a foundation for long-term success.

Smart Steps to Start Today

1. Separate your finances: Open a business bank account or at least track business income/expenses separately.

2. Track everything: Use a simple spreadsheet, app, or bookkeeping system to log every dollar in and out.

3. Consider entity setup: An LLC can protect you legally and give you even more tax options.

4. Consult a pro: A tax strategist can help you decide whether to stay as a sole proprietor, elect S-Corp, or another structure.

5. Think like a CEO, not a hobbyist.

The Bottom Line: If you’re earning money, the IRS already considers you in business. The only question is whether you’ll keep treating it like a hobby—or start running it like the business it truly is.

Every dollar you invest—equipment, supplies, mileage—could lower your tax bill. But only if you get organized.

Ready to Make the Switch?

I can help you:

• Set up your business/LLC

• Organize your bookkeeping (DIY or full-service)

• Build a tax strategy that saves you money now and sets you up for growth

Don’t wait until tax time to realize what you could have written off.

Take the first step today—book your tax planning consultation or join the 2025 Tax Season Waitlist here: tbtxsolutions.com/join

• ❓ Frequently Asked Questions About Side Hustles and Taxes

  1. Do I need an LLC to deduct expenses?
  No—you can claim deductions as a sole proprietor. An LLC adds legal protection and may expand your options.

  2. What if I don’t make a profit yet?
  The IRS allows you to deduct expenses as long as your intent is to make a profit.

  3. Can I write off startup costs?
  Yes—up to $5,000 in your first year, with the rest amortized over time.

  4. Do I have to pay quarterly taxes?
  If you owe more than $1,000 in taxes at filing, you may need to pay quarterly estimated taxes to avoid penalties.

  5. What if I just keep it casual?
  If you don’t treat it like a business, you lose the chance to deduct expenses and may pay more taxes than necessary.