I have a W-2 job and creator income. How am I taxed?
Short answer
Your W-2 wages and your creator profit go on the same tax return, so your creator income is taxed at your top bracket plus self-employment tax, and your paycheck withholding usually won't cover it.
Otavio Mayole, Co-founder, DeCypher FinancialsUpdated
Why creators with a day job get surprised: your employer withholds tax for your salary only. Every dollar of creator profit stacks on top, at your highest rate, plus about 15.3% self-employment tax.
How to stay ahead of it:
- Raise your W-4 withholding at your job. Extra withholding can cover your creator taxes, and it counts as paid evenly through the year.
- Or make quarterly estimated payments for the creator side.
- Track your write-offs. They lower only your creator profit, but that's the income taxed at your top rate.
- Watch your retirement limits. The employee contribution limit is shared between your job's 401(k) and a Solo 401(k).
If your creator business has a real loss, it can generally offset your W-2 income, as long as you run it like a business.
Planning to quit your job? The year you go full-time is often the year to look at an S-Corp and a Solo 401(k).