Taxes When You Get a Second Job

Getting a second job — whether a part-time position, a consulting arrangement, or a side hustle — increases your income and your tax liability, but it can also create a withholding problem that catches many people off guard in April.

The core issue is how withholding works. Each employer calculates withholding independently based on the income from that job alone, treating it as if it's your only source of income. But the U.S. income tax system is progressive — your tax rate increases as your income rises. When you add a second income, your combined income puts you in a higher bracket, but neither employer is withholding at that higher rate. The result is that when you file your return, you often owe additional tax because both employers under-withheld relative to your actual combined income and tax rate.

The fix is to update your W-4. The IRS redesigned Form W-4 to better handle multiple jobs — you can use the IRS withholding calculator (available at irs.gov) to determine the right withholding for your situation, or you can use the multiple jobs worksheet that's part of Form W-4. A simpler approach is to have your primary employer withhold more by entering an additional dollar amount on Line 4(c) of your W-4, which increases withholding by a fixed amount each pay period. Alternatively, you can make quarterly estimated tax payments to cover the gap and avoid underpayment penalties.

If the second job is as an employee (W-2), Social Security taxes (6.2%) will be withheld from both jobs. However, Social Security tax only applies to the first $168,600 of wages in 2024 — if your combined wages from both jobs exceed that threshold, you'll have over-withheld Social Security taxes, and you'll get a credit for the excess on your tax return. Medicare taxes (1.45%) apply to all wages regardless of amount, and the additional 0.9% Medicare surtax applies to combined wages above $200,000 (single) or $250,000 (joint). This additional Medicare tax is not withheld by your secondary employer, so you may need to cover it through increased withholding at your primary job or through estimated payments.

If your second job is freelance or self-employment income, the tax picture is even more significant — you'll owe self-employment tax (15.3%) on that income in addition to regular income tax, with no employer to help cover the withholding. You'll also be responsible for making quarterly estimated tax payments if the expected additional tax from the self-employment income exceeds $1,000. On the positive side, legitimate business expenses from your freelance work reduce the taxable self-employment income, and you may be eligible for the qualified business income deduction on the net profit from that side activity.