See true after-tax profit from a side hustle.
Net hourly after tax + expenses
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Your breakdown
Updates live as you type| Step | Per hour |
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Your side gig pays less per hour than the headline rate
When you pick up a $50-an-hour weekend gig, your brain quietly files it as $50 an hour. It is not. Side hustle income sits on top of your day-job salary, which means it gets taxed at your highest marginal rate, not your average rate. On top of that, anything you earn outside a W-2 is hit with self-employment tax, the 15.3% that covers both halves of Social Security and Medicare that an employer would normally split with you. This tool peels those layers off one at a time so you can see the real wage before you decide whether the hustle is worth your Saturday.
The order the deductions stack in
The math runs in a specific sequence, and the order matters. First, business expenses come off the top, because you only pay tax on profit, not gross revenue. Then self-employment tax is applied, but with a quirk the IRS builds in: SE tax is calculated on 92.35% of your net earnings, not 100%, which is the law's way of approximating the employer-side deduction. After SE tax, your remaining profit is hit with your marginal federal rate plus your state rate. Whatever survives all three is your true take-home.
A $50-an-hour gig in the 32% bracket
Picture a $50 gross hourly rate, a 32% federal marginal rate, a 5% state rate, and 10% of revenue going to expenses like gas and supplies. After expenses you keep $45. SE tax is 92.35% of that, $41.56, times 15.3%, which is $6.36. That leaves $38.64. Income tax at the combined 37% (32% plus 5%) on the $38.64 is $14.30. Your real wage is $24.34 an hour, a 51% drop from the sticker price.
You lose $25.66 of every $50 to taxes and costs. The chart below shows exactly where each dollar of that $50 ends up.
Two things that change the answer
First, half of your SE tax is deductible on your Form 1040, which softens the blow slightly at filing time. This simplified per-hour view does not credit that back, so your annual reality is a touch better than the hourly figure suggests. Second, track your expenses obsessively. The tool lets you set an expense percentage because mileage, software, and supplies directly reduce both your income tax and your SE tax. A rideshare driver who ignores the standard mileage deduction is handing the IRS money. This calculator is built for the person weighing whether to take on more gig work, and the honest answer is that a $50 rate in a high bracket behaves more like a $24 rate.
People also ask
Do I have to pay quarterly estimated taxes on side income?
If you expect to owe at least $1,000 in tax beyond your W-2 withholding, the IRS generally wants quarterly estimated payments via Form 1040-ES. Skip them and you can face an underpayment penalty even if you pay in full by April. A clean workaround is to increase the withholding on your day-job W-4 to cover the side income, which avoids the quarterly filing hassle entirely.
At what point should I form an LLC or S-corp for my side hustle?
For most part-time side gigs, the answer is not yet. An S-corp can cut the SE tax bite once net profit reliably clears roughly $40,000 to $50,000 a year, because you can split earnings into salary and distributions. Below that, the payroll and filing costs usually eat the savings. Run the numbers before paying for a structure you do not need.
The bigger lesson this tool drives home is that the right question is never just the hourly rate, it is the hourly rate after everything. A side hustle that pays $24 net per hour might still be a great deal if you genuinely enjoy it, if it builds a skill that raises your day-job income, or if it can scale beyond trading hours for dollars. But if you are weighing it purely as extra money against the time it eats, compare the net figure to what an hour of your life is actually worth to you, not the headline number the gig advertises. There is also a quieter cost the calculator does not show: side income can nudge your total earnings into a higher bracket, push you past income thresholds that phase out other tax benefits, or trigger the need for quarterly payments and bookkeeping you did not have before. Those frictions are real even when they are small. This calculator exists for the person staring at a $40, $60, or $80 hourly offer and wanting an honest answer to a simple question, which is how much of that actually ends up in their pocket once the IRS and their state take their cut.