Parents with side hustles can often deduct equipment costs as business expenses, reducing taxable income. Eligible deductions include tools, computers, and other work-related gear, provided they’re ordinary and necessary. The IRS requires detailed records, like receipts, to support claims. Home office deductions may also apply if a dedicated workspace is used exclusively for the side hustle.
Tax Deductions for Side Hustle Equipment Costs
For parents juggling a side hustle alongside family responsibilities, every dollar counts. One way to maximize earnings is by leveraging tax deductions for equipment costs. The IRS allows self-employed individuals, including side hustlers, to deduct expenses that are both “ordinary” (common for the business) and “necessary” (helpful and appropriate for the work). This can include equipment like laptops, cameras, tools, or even specialized software used exclusively for your side gig.
For example, a parent running a freelance photography business can deduct the cost of a new camera or lighting equipment. If you’re a rideshare driver, you might deduct a portion of vehicle maintenance costs based on business mileage. According to the IRS, the standard mileage rate for 2025 is 67 cents per mile for business use, which can cover gas, maintenance, and insurance costs. Alternatively, you can use the actual expense method, calculating the percentage of vehicle use for business purposes and deducting related costs like fuel and repairs.
To qualify, equipment must be used primarily for your side hustle. If you use a laptop for both personal and business purposes, you can only deduct the percentage of use tied to your work. For instance, if 60% of your laptop use is for your Etsy shop, you can deduct 60% of its cost. Keeping detailed records—receipts, invoices, and logs—is critical, as the IRS may scrutinize these deductions during an audit.
Home office deductions are another opportunity for parents. If you use a dedicated space in your home exclusively for your side hustle, you can deduct a portion of housing expenses like rent, mortgage interest, or utilities. The IRS offers two methods: the simplified method ($5 per square foot, up to 300 square feet, for a maximum $1,500 deduction) or the actual expense method, which calculates the percentage of your home used for business. For example, if your home office is 10% of your home’s square footage, you can deduct 10% of eligible housing costs.
Some side hustles may also qualify for immediate deductions on equipment costing $20,000 or less under the IRS’s temporary expensing rules for 2025, particularly for small businesses with turnover under $10 million. This can include computers, office furniture, or even vehicles, provided they’re used for business purposes. For pricier equipment, you may need to depreciate the cost over several years.
Parents should also consider deductions for professional services, like accounting or legal fees, and educational expenses, such as courses to improve skills related to their side hustle. For instance, a parent running a tutoring business could deduct the cost of a teaching certification course. However, expenses must be directly tied to the current business, not a future venture.
To maximize deductions, maintain a separate bank account for your side hustle and use accounting software like QuickBooks or apps like Keeper to track expenses. If you earn $600 or more from a single client, expect a Form 1099-NEC or 1099-K, which reports your income to the IRS. Even without these forms, you must report all income over $400 on Schedule C, along with deductible expenses.
For parents, the flexibility of side hustles like content creation, pet sitting, or freelance writing is ideal, but tax compliance is key. Consulting a CPA can help navigate complex deductions and avoid penalties, especially since self-employed individuals must pay quarterly estimated taxes if they expect to owe $1,000 or more annually. Setting aside 25-30% of your side hustle income for taxes is a smart practice to cover federal, state, and self-employment taxes.
Disclaimer: This article provides general tax information and tips based on current IRS guidelines and reputable sources. Always consult a certified tax professional for personalized advice tailored to your situation.
