Supplementing your income with a side gig can be financially rewarding, but it also comes with tax responsibilities you shouldn’t overlook. In Pennsylvania, any earnings you receive beyond your main job are subject to taxation. Whether you’re delivering food, selling goods online, or offering tutoring services, it’s essential to understand how these earnings are taxed at the state level.
Income reporting requirements
All income earned through side gigs must be reported on your federal and state tax returns. This includes payments made in cash or through digital platforms. If you earn at least $600 from a client or company, you may receive a 1099 form. However, even if you do not receive one, you are still legally obligated to report the income.
Pennsylvania imposes a flat personal income tax rate of 3.07%, which applies to side gig earnings as well. To file accurately, maintain detailed records of all income received throughout the year.
Deducting business expenses
Many side gigs involve costs that may be deducted to reduce taxable income. These expenses can include materials, travel mileage, or a portion of your internet bill if it’s used for business. To support these deductions, you must retain documentation such as receipts and detailed logs.
The state permits deductions for ordinary and necessary business expenses, but these must be clearly separated from personal expenses. For example, if you use your vehicle for both personal errands and deliveries, only the business-related mileage is deductible.
Paying estimated taxes
Since side gig income is often untaxed, you may need to make quarterly estimated tax payments to avoid penalties. This applies at both the state and federal levels. Pennsylvania has specific forms and deadlines for these payments, so it’s important to budget accordingly if you anticipate owing taxes.
While side gigs offer financial flexibility, tax obligations can create issues if you’re not prepared. Maintain organized records of your earnings, set aside funds for taxes, and document business-related expenses. Doing so helps ensure you won’t face unnecessary surprises when filing your return.
