I started driving for a ride-share app in 2025 to cover rising rent costs. By December, I had grossed roughly $28,500 in side income.
When I opened my tax software in January 2026, my stomach dropped. The estimated tax bill was massive. I was treating my side hustle like a W-2 job, and it was costing me a fortune.
That is when I discovered the deduction that most new freelancers completely miss. It’s not a shady offshore loophole; it is Section 199A, better known as the Qualified Business Income (QBI) Deduction. And for the 2026 tax season, it is the single most powerful tool in your arsenal.
The “Double Dip” Strategy
Most people know about the Standard Mileage Rate. But here is what I missed: You can claim your mileage expenses to lower your profit, AND THEN claim the QBI deduction on the remaining profit.
Here is the math that saved me:
- Gross Income: $28,500
- Mileage Deduction: I drove 18,000 miles. At the 2025 rate of 70.5 cents/mile, that’s a $12,690 deduction.
- Net Profit: $15,810 (This is what I get taxed on).
The QBI “Loophole”: Because I am a sole proprietor, the IRS lets me deduct an additional 20% of that Net Profit automatically.
$15,810 x 20% = $3,162 deducted tax-free.
The 1099-K Myth (Don’t Get Burned)
There is a dangerous rumor floating around Reddit that if you made under $20,000, you don’t have to report it because you didn’t get a Form 1099-K.
This is false.
- The Law: Even if you didn’t receive a form, income is income.
- The Risk: If you don’t report the income, you can’t claim the losses or the QBI. You are technically safer reporting it and taking the deductions than hiding it and hoping the IRS AI doesn’t see your bank deposits.
2026 Side Hustle Tax Breakdown
| Deduction Type | 2025 Rate (Filed in 2026) | Who Qualifies? |
| Standard Mileage | 70.5 cents per mile | Drivers, Couriers, Mobile Notaries |
| QBI Deduction | 20% of Net Profit | Sole Props, S-Corps, LLCs |
| Home Office | $5 per sq. ft. (Simplified) | Freelancers (Must be exclusive space) |
| Start-up Costs | Up to $5,000 | New businesses formed in 2025 |
How to Claim It
You do not need to itemize your personal deductions to get this. The QBI is taken in addition to your Standard Deduction.
- Fill out Schedule C (Profit & Loss).
- Look for Form 8995 (Qualified Business Income Deduction Simplified Computation).
- Most software handles this automatically, but only if you check the box saying you are a “Qualified Business.”
Bottom Line: If you are freelancing, you are a business owner. Stop filing like an employee. Claim your mileage, take the 20% QBI cut, and keep your hard-earned cash.
Disclaimer: This article is for informational purposes only. Always consult official government resources or a CPA.
Evan Cole Editor-in-Chief | Breaking News & Public Policy
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