Mark Kohler breaks down why a side hustle beats a W-2 job on taxes. Earn $1,000 as a W-2 employee and take home roughly $600 after withholdings. Earn the same $1,000 as a 1099 contractor, deduct business expenses like your phone, meals, car, and home office, and keep the full $1,000 tax-free.
Chapters
Here's the secret math of a side hustle. If I go out and work for someone else and make $1,000, first of all, you're going to have a ceiling on what you can make per hour. And you're going to get a W2 where there's going to be withholdings, taxes for state and Federal and FICA, and that paycheck of 1,000 is going to maybe feel like $600. And you're like, what the hell? I went out and worked on the weekend as a second job working for someone else and that thousand dollars really ended up in my pocket at about $600. And then we even feel worse about ourselves. The secret math of a side hustle is and create $1,000 on a 1099. Because I can now write off my cell phone, some dining, some auto expenses, some home office to supply, some equipment, some marketing, who knows what. I can drum up $1,000 in write offs every month for a client called personal conversion expenses. So I can take those write offs and offset that thousand. The secret, I get to take home a thousand. $1,000 tax free. I could go work for someone else, which is cool. Get the second job if it's too mentally difficult to think of, I can be an entrepreneur with this little side hustle. I'm going to go earn 1,000 and take home 600. Or I can go earn a thousand. And that's the secret math. So if we're trying to fight inflation, we can do it faster and exponentially better with a side hustle rather than working for someone else.
