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Starting a side hustle is exciting — but understanding the tax impact is critical from day one. Whether you're freelancing, selling products online, consulting, or providing services, the IRS considers this business income, even if it’s part-time. That means proper reporting, tracking expenses, and planning for self-employment taxes are essential.
Key tax considerations include:
- Choosing the right business structure (Sole Proprietor, LLC, S-Corp)
- Tracking deductible expenses (home office, mileage, software, supplies)
- Understanding self-employment tax obligations
- Making quarterly estimated tax payments
- Keeping clean records to avoid penalties
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