A Quick Guide to Summer Supplemental Income
Summer is the season of sunshine, long weekends and finding creative ways to earn a little extra cash. Whether you’re walking dogs, hosting guests through Airbnb, selling crafts at the farmers market, or picking up a few rideshare shifts, that added income can be a great boost. But it’s important to remember that even small-scale freelance or seasonal work can have tax implications. With a little planning now, you can hold onto more of your hard-earned dollars.
What Counts as Taxable Supplemental Income?
Even if you’re making money outside of a traditional W-2 job, it’s likely considered taxable income. This includes app-based work like deliveries or tutoring, lawn care, craft sales, or even renting out your spare room at home. If you’re regularly offering services or accepting payments with the intention to earn a profit, the IRS generally sees it as a business, not just a hobby.
Do I Really Need to Report It?
Short answer: yes. Even if you only made a few hundred dollars, you’re required to report self-employment income over $400. Platforms like Airbnb or Etsy may send you a 1099 form, but you’re still responsible for reporting income even if you don’t receive one.
Cash payments? Still taxable. Just because it wasn’t reported to you doesn’t mean it isn’t reportable by you.
What Can I Deduct?
The good news is you may be able to deduct “ordinary and necessary” expenses related to your work. Here are a few examples:
- For drivers: mileage, tolls, and insurance
- For Airbnb hosts: cleaning fees, linens, supplies, a portion of utilities or insurance
- For craft sellers: materials, vendor fees, packaging, and shipping supplies
- For freelancers: advertising, software, a portion of phone and internet bills
Just be sure to keep good records. Save receipts, log mileage, and track everything consistently.
Don’t Forget About Self-Employment Tax
When you are earning income independently, you are responsible for both the employer and employee portions of Social Security and Medicare, about 15.3%, in addition to regular income tax. If you make a significant amount from your supplemental income, consider setting aside a portion of your earnings or making quarterly estimated payments to stay ahead and avoid surprise penalties later. Upcoming 2025 estimated payment deadlines include June 16th, September 15th, and January 15th.
Planning Tips
It might feel like “just a little extra cash,” but side income can add up quickly. To stay organized:
- Open a separate bank account just for your supplemental income and related expenses. It simplifies recordkeeping and makes tax prep much easier.
- Use a basic spreadsheet or link your account to simple bookkeeping software. A few minutes each week can save hours later.
- Talk with a CPA to help clarify questions about deductions, estimated payments, or whether your growing income could benefit from a different business structure.
Earning extra income this summer can be a great way to meet financial goals, build a safety net, or even fund your next vacation. Just don’t let tax time catch you off guard. A little effort now like keeping good records, understanding what’s deductible, and setting aside money for taxes can go a long way in making next spring’s filing season a breeze.
Have questions about your unique situation? A quick conversation with a CPA can help you feel confident, informed, and ready to make the most of your summer earnings.
Megan Williams, CPA is a Senior Staff Accountant for Keller & Associates CPAs, PLLC.
Published in the Victoria Advocate.
