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A 2024 report from McKinsey & Company found that 36% of employed Americans — roughly 58 million people — identify as independent workers, with many using side hustles to supplement their primary income. When you’re building something on the side — whether it’s freelance coding, selling vintage finds or coaching clients — every dollar of revenue feels hard-won. So when tax season arrives, the real question isn’t just how much you made, but how much you get to keep.
That shift is happening at scale. A recent Bankrate survey found that 27% of U.S. adults now have a side hustle, driven largely by the need to diversify income in an uncertain economy. This is no longer pocket change — it’s real business. And with it comes the need to understand deductions properly, not guess at them. As CEO of Dimov Tax, I’ve seen both extremes. Some clients try to deduct personal expenses like Spotify subscriptions as “creative inspiration.” Others go too far in the opposite direction, avoiding legitimate deductions out of fear of an audit and overpaying taxes as a result.
If you’re running a side hustle and are unsure what you can and cannot deduct, here’s a clear breakdown.
What you absolutely cannot claim
Let’s start with appearance. I once worked with a life coach who asked if she could deduct a new professional wardrobe because she only wore those outfits for client sessions. The answer was no. The IRS is clear: clothing that can be worn outside a specific work requirement is considered personal. Exceptions include uniforms with logos, safety gear, or costumes used strictly for performance. That manicure before an Instagram Live sale? Personal. Botox before a keynote? Still personal. These are viewed as personal enhancements, not business expenses.
Business meals are another common misconception. A sandwich eaten while working at your desk is not deductible. Meals are only deductible when they are directly tied to a business discussion with a client, contractor, or partner — and must be properly documented. Overnight travel for business is an exception, where meals may qualify. But an ordinary solo lunch on a Tuesday does not.
What you can claim
One of the most valuable — and misunderstood — deductions is the home office. You don’t need a dedicated room. You need a space used regularly and exclusively for your business. For example, if you use 100 square feet of a 1,000-square-foot apartment for an Etsy shop, you can deduct 10% of eligible household expenses such as rent, utilities, internet and insurance. Alternatively, the simplified method allows $5 per square foot up to 300 square feet.
Business tools are also fully deductible. That includes laptops, software subscriptions, ecommerce platforms and specialized equipment. Larger purchases like cameras or production tools may qualify for immediate expensing under Section 179. Vehicle use can also add up. If you use your car for deliveries, supply runs, or client meetings, you can deduct mileage — 67 cents per mile for 2024. But documentation is critical; the IRS requires a detailed log, not estimates.
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