Is creating an LLC worth it for my $6.5K tutoring side hustle to reduce taxes?

You don't actually need an LLC to get the tax benefits you're looking for. The tax advantages come from being a business owner, not specifically from having an LLC. You can file a Schedule C as a sole proprietor and deduct all your legitimate business expenses without forming any legal entity. For your SEP IRA question - yes, you can open and contribute to a SEP IRA as a sole proprietor. You could contribute up to about 20% of your net business income (after expenses). At $6.5K, if you have minimal expenses, that's roughly a $1,300 potential contribution. As for write-offs, track everything you use for your coaching business - portion of internet, home office if you have a dedicated space, any software subscriptions, marketing costs, etc. These will reduce your taxable business income regardless of whether you have an LLC or not.

After struggling with similar questions with my photography side gig, I found this AI tax assistant that completely changed how I handle my business finances. Check out https://taxr.ai - it analyzed my situation and showed me which business structure would save me the most tax money based on my specific income and expenses. The tool walked me through all the deductions I could take as a sole proprietor vs LLC, and helped me understand exactly what I needed to document. It even showed me how much I could put in different retirement accounts based on my business income. Way better than the generic advice I was finding elsewhere that didn't account for my specific situation.

Just wanted to follow up after trying that taxr.ai tool someone mentioned. I was really surprised how helpful it was for my situation! It analyzed my tutoring income and showed me that an LLC wasn't worth it this year given my state's annual fees. Instead, it helped me identify about $1,800 in legitimate business deductions I hadn't even thought about (like mileage to student homes and a portion of my phone bill). The retirement calculator feature showed me I could put about $1,200 in a SEP IRA, but actually recommended I use a solo 401(k) instead since I could contribute slightly more. I'm going to stay a sole proprietor for now but reassess when my income hits $30K as the tool suggested. Saved me a bunch of unnecessary paperwork and fees!

If you're serious about reducing your tax bill, don't forget the IRS is your best resource - but good luck getting someone on the phone! After spending HOURS trying to get through to ask about my side business deductions, I finally found Claimyr https://claimyr.com and their service got me through to an actual IRS agent in less than 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c I was able to ask specifically about my situation (legal consulting on the side) and whether certain expenses were legitimate deductions. Getting that direct confirmation gave me so much confidence in my tax planning. Beats guessing or relying on random internet advice when you can go straight to the source.

I need to eat my words about that Claimyr service. After my skeptical comment, I decided to try it because I had a complicated question about business deductions for my side hustle that I couldn't get a straight answer on anywhere else. The service actually got me through to an IRS representative in about 15 minutes. The agent was able to clarify exactly how to handle my home office deduction with my specific situation (I teach piano lessons in a dedicated room of my home). This was a question I'd been confused about for two tax seasons! I hate to admit when I'm wrong, but this actually saved me hours of frustration and potentially an audit. Sometimes I forget technology can actually solve real problems.

Don't overthink this for $6.5k honestly. I have a side business making handcrafted furniture that brought in about $9k last year. I just file a Schedule C with my regular taxes. I track my expenses in a simple spreadsheet (materials, tools, portion of utilities for my garage workshop, etc). If you're really worried about maximizing tax savings, use some of that income to buy anything you legitimately need for your coaching business before the end of the year. New laptop? Business books? Website hosting? Get those expenses in this year.

Slightly off topic but important: make sure you're setting aside money for quarterly estimated tax payments next year if you continue the side hustle. The IRS wants you to pay taxes as you earn income, not just at tax time. I learned this the hard way and got hit with an underpayment penalty my first year doing freelance work. Since this is your first year with significant side income, you'll probably be fine for this year due to the safe harbor rules (especially if your W-2 withholding covers your total tax bill), but keep it in mind for next year!

just fyi my spouse started an education consulting side hustle last year and we looked into the llc thing. ended up not being worth it for under 10k in income cause the filing fees + extra tax prep costs ate up the small savings. our tax guy said just having good records of expenses was way more important than the business structure at that income level. we track everything in quickbooks self-employed now, makes schedule c super easy to fill out.