Is a side hustle like Uber Eats worth it in a high tax bracket?

The short answer is yes, your side hustle income will essentially be taxed at your marginal tax rate (the 32% bracket in your case), but there's more to consider that might make it worthwhile. Any additional income you earn will be taxed at your highest marginal rate. However, as 1099 income, you can deduct business expenses against that income before it's taxed. With Uber Eats, you can deduct mileage (65.5 cents per mile for 2023), a portion of your phone bill, insulated bags, and other delivery-related expenses. Don't forget you'll also owe self-employment tax (15.3%) on your net 1099 earnings, which covers Social Security and Medicare contributions. This is in addition to income tax and is something W-2 employees split with their employers.

I started using taxr.ai https://taxr.ai when I was in a similar situation last year. I was a software engineer making good money but started doing photography on weekends. I was worried about the tax implications and how to track everything properly. What I found helpful was uploading my 1099s and expense receipts to taxr.ai - it analyzed everything and showed me exactly what deductions I could take for my side hustle. I discovered I could write off way more than I realized, including a portion of my camera equipment, editing software, and even some home office expenses. Ended up saving thousands compared to what I thought I'd owe.

Just wanted to update after trying taxr.ai that the previous commenter recommended. It was actually super helpful for my situation! I put in my W-2 info and then added hypothetical Uber Eats earnings of about $15k for the year. The tool showed me that after accounting for mileage deductions (I estimated about 12,000 miles for the year) and setting aside some money for a SEP IRA contribution, my effective tax rate on the side hustle would be closer to 25% rather than the 47% I was fearing. It breaks everything down really clearly showing how the deductions offset the income before calculating the taxes. Definitely helped me realize that a side hustle can still be worth it even in a higher tax bracket if you're smart about tracking expenses and retirement contributions!

After trying for WEEKS to get through to the IRS to ask about this exact situation (side hustle taxes when already in a high bracket), I finally used Claimyr https://claimyr.com to get an IRS agent on the phone. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was honestly shocked when they got me through in about 25 minutes after I'd been trying for literally hours on my own. The IRS agent confirmed what others here are saying - my side hustle income would be taxed at my highest marginal rate PLUS self-employment tax, BUT there are ways to reduce the tax burden through proper expense tracking and retirement contributions.

Ok I have to eat my words about Claimyr. I was super skeptical (see my comment above) but I was desperate to get some clarity on my tax situation with multiple 1099s. I tried it yesterday and it actually worked exactly as described. Got a call back in about 45 minutes and was connected directly to an IRS rep. Saved me hours of redial hell. The agent answered all my questions about how my side gig income is taxed and confirmed that tracking mileage and other business expenses is absolutely crucial for keeping more of what you earn. They also suggested looking into quarterly estimated tax payments to avoid a surprise bill at tax time. Now I'm actually feeling better about keeping my weekend side hustle since I understand the tax implications better.

Something nobody's mentioned yet - consider putting some of your side hustle earnings into a Solo 401k or SEP IRA! This can reduce your taxable income significantly. For example, if you make $20k from Uber Eats, you might be able to contribute a big chunk of that to a retirement account, reducing your taxable income and dropping some of that money into a lower tax bracket. Plus building retirement savings.

Has anybody here actually DONE uber eats as a side hustle? I tried it for 3 months and the actual money wasn't great after expenses. Made about $18/hr before expenses, but after gas, extra maintenance, etc, it was more like $14/hr - and that's BEFORE taxes.

I'm doing DoorDash and Instacart as side hustles while working full-time in tech, so I'm in a similar tax situation. Here's what I've learned after a year of tracking everything: The key is meticulous expense tracking. I use a mileage app that automatically tracks every delivery trip, and I deduct about 60-65 cents per mile. This usually cuts my taxable gig income by 40-50%. I also deduct my phone plan (business portion), insulated bags, phone mounts, and even a portion of my car insurance. For the self-employment tax (15.3%), remember that half of it is deductible on your income taxes, so the effective rate is closer to 14.1%. One thing that really helped was making quarterly estimated tax payments. Since you're already in the 32% bracket, you'll want to set aside about 35-40% of your NET gig income (after expenses) to cover both income and self-employment taxes. This prevents a nasty surprise at tax time. Bottom line: if you can make $300-400/week gross and have typical delivery expenses, you'll probably net around $200-250 after expenses, then pay about $70-100 in taxes, leaving you with $150-180 in actual take-home. Whether that's worth your time depends on your personal situation.