Nearly 1 in 5 (19.5%) people ages 65 and up still work, even if they're technically considered retired, according to a 2025 report from the U.S. Bureau of Labor Statistics. Most people in this demographic work part-time.
Some take on a side hustle or do consulting. While this can help with financial security, it also comes with some surprising tax implications. Before taking on a side hustle in retirement, it helps to know how it'll impact your other sources of income (and taxes).
That way, you can plan ahead and avoid an unpleasant surprise come tax time. If you earn at least $400 in net earnings from a side hustle, you'll generally have to pay self-employment tax on 92.35% of your total profit. As per the IRS, the typical tax rate is 15.3%.
This includes: Unfortunately, retirees who've already started collecting Social Security aren't exempt from this rule. Your side hustle earnings could also affect your overall tax situation and your Social Security benefits. "With the added earnings comes increased taxability of some portion of your Social Security benefits, in addition to tax on the side business," said Geoff Knight, a tax expert and founder of File Tax.
Normally, the taxable amount of your Social Security income ranges from 50% to 85%. For example, the Social Security Administration (SSA) requires you to pay taxes on up to 85% of your benefits if you: File a federal tax return as an "individual" and earn over $25,000 (combined income) File a joint tax return and earn over $32,000 (combined income) If you earn below a certain income threshold, your benefits might not be taxable at all. But if your side hustle earnings put you into a higher income threshold, it could more of your Social Security income taxable.
Earning money through a side hustle could put your total income over Medicare's Income-Related Monthly Adjustment Amount (IRMAA) threshold. This could mean higher Medicare premiums. "Even a small amount of income that drives their total income over a IRMAA threshold (the extra you pay for Medicare when you have high income) can act like a pretty major de facto tax," said Caleb Moyer, owner and enrolled agent at Moyer Tax Services.
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