The Hidden Costs of Side Hustles: Fees, Fuel, Equipment and Tax
Every side hustle has a headline number: what an app says you earned, or what a buyer paid. What lands in your pocket is smaller, sometimes much smaller. Knowing the gap before you start helps you pick the side hustle that actually pays best for you.
The five costs to count
1. Platform fees
Marketplaces, gig apps and freelance sites take a cut, usually as a percentage of each sale or job, sometimes with a payment processing fee on top. A few charge nothing for local pickup sales. Check the fee page before you list anything.
2. Fuel and vehicle wear
For delivery and driving, the car or scooter is part of the job. Fuel is the obvious cost. Tyres, servicing, extra insurance and the value your vehicle loses with every mile are the hidden ones.
3. Equipment and materials
A better microphone for user tests, insulated bags for deliveries, materials for crafts, stall fees at a market. Small amounts, but they add up over a year.
4. Unpaid time
Waiting for orders, travelling to a dog walk, answering buyers who never buy, getting screened out of surveys. None of it is paid, and all of it belongs in your hourly rate.
5. Tax
In many countries, side income is taxable once it passes a certain amount. In the US, self-employment tax of 15.3% generally applies on top of income tax once your net self-employment earnings reach $400 in a year. In the UK, the first £1,000 of trading income a year is usually tax-free under the trading allowance. Rules vary, so check your own country's tax authority.
A worked example: one delivery shift
Here's what a three-hour evening on a delivery app might look like once the costs come off.
| Step | Amount | Per hour |
|---|---|---|
| What the app shows for the evening | $54.00 | $18.00 |
| Minus 40 miles at an assumed $0.30 a mile for fuel and wear | −$12.00 | |
| After vehicle costs | $42.00 | $14.00 |
| Minus 25% set aside for tax | −$10.50 | |
| What you keep | $31.50 | $10.50 |
The app said $18 an hour. After costs and tax, it's closer to $10.50. That may still be worth it, but it changes the comparison with, say, tutoring from home, which has almost no costs at all.
How to keep more of what you earn
- Track costs alongside earnings. Add a "Costs" column to your money log. Our guide to setting up a money log shows how.
- Set money aside for tax as you go, in a separate account, so a tax bill never comes as a surprise.
- Keep receipts. In many countries some costs can be deducted from taxable side income. Your tax authority's website explains what counts.
- Compare options on what you keep, not on headline pay.
This is general information, not tax or financial advice. This page is part of a 4-part guide on choosing a side hustle.