Tag: side gig

Follow Your Heart (But Fund Your Dreams)

“Follow your heart” is such a great piece of advice…

We preach it, and we teach it, and we sing its praises, but dreams cost money, and so does survival. Out of the two the latter usually wins, which may seem unfair. At least I thought it was. Until I learned that you don’t have to choose. You can follow your heart and fund your dreams.

To make your dreams come to pass takes sacrifice. It takes time and effort and (usually) money, but it also might mean uprooting yourself, or taking a huge risk, or abandoning security for the sake of a chance and a shit-ton of “what ifs.” We dole out the notion of “do what you love” like it’s an option for everybody, and then when it isn’t, we shrug and say nothing.

What I Learned (the hard way)

I know this because I’ve done that. High on my own “quit my job, move and write” (only for it to end disastrously), I told everybody who’d listen to throw caution to the wind and to take a chance, be courageous, embrace gutsiness, and fight for what they wanted because someone else would if they did not.

I didn’t take into account what it’s like to be a parent, or to have responsibilities to family or friends, or a community, or to not live off a line of credit like I was about to do (see:? disaster). I didn’t think about past experiences or what my friends and family’s concerns were and why. And I certainly didn’t think of how I looked, standing there lecturing like a professor about as equipped as Kramer from Seinfeld, wielding a briefcase of crackers. I was all about following my heart, but didn’t consider how I would actually fund my dreams.

Related:? 5 Ways to Free Up Cash Without a Side Gig

We dole out the notion of “do what you love” like it’s an option for everybody, and then when it isn’t, we shrug and say nothing.

To pay for college, I had worked two jobs and lived at home. I worked at a bank and a clothing store at the mall, and my days were long and I was tired always, but it was fine. After college, I spent the first year working only at the store before deciding to quit that job and “become a writer” (despite my writing income of only about $200/month.) In short, I was an idiot. When I moved out of my parents’ house the next year, I used my line of credit as a bank account, making about $400 for every $1,200/month I was spending. What happened? I eventually landed myself right back at my parent’s home and in a shit-ton of debt.

What I Could’ve Done Instead (but was too stubborn)

But it could’ve ended differently. As I struggled to make ends meet, my friends who were in the same financial boat worked part-time jobs as servers or baristas, viewing their regular jobs as a way of funding what they really wanted to do (writing, art, music) while ensuring they could eat and pay rent. One friend described her job to me as her “dream funder.” Today, I think she was brilliant.

I don’t know what my problem was. As in, I don’t think I can narrow it down to a single issue. I was stubborn, prideful, and convinced that doing the logical thing was the “weaker” thing. I couldn’t figure out how my friends could make life work and I couldn’t, all while getting increasingly frustrated. So, I learned the hard way — I moved back home, wrote full time (whether I wanted to write or not) until I could dig myself out of the ditch I’d taken a nap in.

If someone can’t afford to do what they love, we need to know that dreams can still be pursued – because they can be funded.

Today, when I talk to teens and twenty-somethings about what they want and who they want to be, I relay the advice that I used to neglect. I tell them to follow their hearts, but to make sure they’re filling the pool — whether financial, mental, or emotional. I tell them to make sure that they’re doing something to ensure that what they’re doing isn’t taking away from the big picture.

The Pros of Not Quitting Your Day Job

And I’ll admit, there’s a certain power and freedom in having a boring day job you don’t really care about, regardless of how much you may envy friends working full-time in the field you want to be in — especially if you can just leave work at work. 5 p.m. rolls around and you owe nothing to nobody. You can freelance at night, snag company benefits, and slowly work your way into the world you want to be in at your own pace. Because I’ll be honest:? once you start doing what you love full time, it can seriously take over a huge part of your life — especially if your job revolves around the internet. Add that to the big picture.

There is no Right Way to Chase your Dreams

The bigger problem is that we believe the big picture is finite. It isn’t. Dreams vary, but unless yours is to pick up and move to Los Angeles and win an Oscar (and honestly — good luck if so), there are ways to move towards your dreams while still keeping your head above water. Do you want to write? Start a newsletter and use it as a jumping off point to pitch publications. Do you want to act? Look into drop-in classes or see what your community theatre offers. (At least to start.) Make music? If you can’t afford an instrument, play around with GarageBand or read up on the tools used by artists like Grimes (who produces her own music and is self taught). Do you want to write a book? Take an hour or two a week and write. There is no wrong way to follow your dreams. Taking your time requires patience and tenacity, it also means you’ll get to do it without wanting to scream into the night.

The bigger problem is that we believe the big picture is finite. It isn’t.

Still, maybe for you it isn’t about money. Maybe you don’t need to take small steps and can throw yourself into an industry because you’ve got the privilege of comfort. Then it’s up to you to fund your emotional and mental state. Stay sharp. Read: books, magazines, blogs. Watch the news. Listen when people who are smarter than you are talking. Soak up as much information as you can and then keep soaking it up because you have to replace what you’re expending. That’s how the best dreams are turned into reality.

Pride has no place in chasing dreams. If you love something and are sure you want to make it your life, there’s no timeframe or blueprint to follow — your dreams are on your own terms. Which means that if funding them takes a second, or sees you pause between opportunities, that’s fine. The only person who gets to dictate the terms of what you want is you. Don’t let friends stuck up on their high horses make you think otherwise.

Anne T. Donahue writes for MTV News, Refinery29, The Guardian and other publications. She is in a loving and committed relationship with Leonardo DiCaprio, even though he is not aware of that.

Tags: , , , , , , , ,

How to Turn Your Side Gig into a Tax Cut

If you?re making money with a side gig, I have bad news and good news for you. The bad news: You have to pay taxes on that extra cash. The good news: With some creative (and legal) accounting, you might be able to turn that side gig income into a tax cut? or at least seriously reduce any tax you might owe on it.

Two tax options for side gig income

Whether you do odd jobs for TaskRabbit, clean up as an Airbnb host, drive for Lyft, or offer freelance services, any cash you pick up gets added to your taxable income. But where and how you report that side money can make a serious difference in the taxes you owe on it.

  1. The IRS?s first choice: Just include it as another line item as ?other income.? That way, there?s nothing to think about, and you pay tax on the full amount.
  2. A better choice for you: Treat your side gig like a business? because it is one. And that means you can deduct all of your ?ordinary and necessary? business expenses ? and put a serious dent in your tax bill.

Depending on the type of side gig(s) you have, you?ll work with either Schedule C (this cover most gigs) or Schedule E (for renting out space). Either way, it pays to keep track of any expenses you rack up in your pursuit of extra income.

Schedule C when you?re the business

Most side gigs fall into Schedule C territory, the form for reporting ?Profit or Loss from a Business.?

Any company you work for has to send you a Form 1099-MISC if you earn at least $600 during the year. If you earn less than that, or don?t get the form for some other reason, you still have to report the income? the IRS fines, penalties, and interest can be pretty steep if you don?t.

Side note: Having more income may not be great for your tax bill, but it is good when you?re trying to rent an apartment or apply for a loan.

Deductible expenses

Now come the deductible expenses ? pretty much anything you paid for to keep the gig going, attract more customers, or offer better service.? You?ll want to deduct every possible penny to shrink that income down for tax purposes. Your expenses have to make business sense for the type of gig you?re doing (like sheet music for a guitar instructor). Here are some examples of common expenses you might not realize you can take:

  • Home office deduction (the square-foot method is super easy)
  • Mileage (for driving to meet customers and other business outings)
  • Business cards
  • Deprecation expense (for any equipment you use)
  • Education (like webinars and e-books)

If you?ve made at least $400 after deducting every expense you can think of, you?ll also complete IRS Schedule SE for self-employment tax (tax apps and programs usually do this automatically).

If you ended up shelling out more for expenses than you brought in, that business loss offsets the rest of your taxable income, lowering this year?s tax bite.

Special tips for Lyft and Uber Drivers

When you drive for a ride-sharing service, you may get two different types of 1099s (IRS forms that report payments) for your work.

A 1099-K covers any payments for driving you got directly from customers.

Form 1099-MISC reports any non-driving income, including things like referral bonuses.

Here?s the tricky part about your 1099-K: The main dollar amount on this form, found in Box 1a, is the total customer payment ? not just the payment you actually got. So you?ll need to include the ride-sharing service?s commissions and fees in with your deductible expenses.

You may also have expenses that other side gigs don?t, such as:

  • Tolls
  • Parking
  • Car wash
  • Car detailing
  • Bottled water and snacks (for customers)
  • Smartphone charges (unless you have a separate phone for this, you can only deduct the business portion)

When it comes to your driving expenses (like gas, repairs, and insurance), you?ll probably make out better using the standard mileage deduction, which is 53.5 cents a mile for 2017. Make sure to keep a mileage log that tracks all of your professional driving, including miles you drove for rides that were cancelled or trips to meet up with inspectors, just in case the IRS asks for proof.

Schedule E for rental gigs

When you?re renting out space in your home for extra money, all of your rental earnings go on Schedule E. And when you rent out property, the list of deductible expenses is pretty long.

The 14-day rule: If you live in the space you?re renting ? like many Airbnb hosts do ? you only have to report your rental income if you that space is rented for 15 days or more during the year. If you only rented it for 14 days, that?s totally tax-free money.

Any expenses directly tied to your rental income are 100% deductible. Those include things like

  • Cleaning services
  • Airbnb (or HomeAway or VRBO) fees
  • Advertising
  • Rental insurance
  • Decorating the rental area
  • Guest towels and linens

Indirect expenses like mortgage interest, property taxes, and utilities have to be allocated between the guest-time and you-time in the house (or by area if you rent out a room or section of your home).

If you lose money on your rental gig, you may be able to deduct those losses against the rest of your income, reducing your overall tax bill.

Should you go to a pro?

If you made a lot of money on your side gig and you?re not sure what you can deduct from that income, consider talking to a CPA ? at least the first year that you?re in business.

Professionals know about deductions that you may not, and they?ll be right by your side if the IRS decides to call you in for an audit.

Plus, every penny you pay the tax pro is a fully deductible business expense. That, along with how much more she can lower your tax bill, makes it an expense that pays for itself.

Michele Cagan is a CPA, author, and financial mentor. With more than 20 years of experience, she offers unique insights into personal financial planning, from breaking out of debt and minimizing taxes to maximizing income and building wealth. Michele has written numerous articles and books about personal finance, investing, and accounting, including The Infographic Guide to Personal Finance, Investing 101, Stock Market 101, and Financial Words You Should Know. In addition to her financial know-how, Michele has a not-so-secret love of painting, Star Wars, and chocolate. She lives in Maryland with her son, dogs, cats, and koi. Get more financial guidance from Michele by visiting SingleMomCPA.com.

Photo by?Hannah Wei

Tags: , , , , , , , ,