How Moonlighting Can Impact Your Taxes

Jerry Guttman is a financial advisor with around 40 years of experience teaching people how to manage their wealth and finances. As the CEO of Total Living Plan, Jerry Guttman works with various clients in managing their retirement plans and making the most out of their income. Total Living Plan caters to employees who want to take the burden off tax management, including moonlighters.

The practice of moonlighting (working a second job for extra income) is not particularly common, with about 4 percent of the US workforce keeping two or more income sources, according to the U. S. Bureau of Labor Statistics. An employee can decide to find a second job for several reasons, usually if they find themselves in financial trouble or have additional spare time.

Earning more money as a moonlighter might seem great in theory but can have significant tax considerations. The additional income can push an employee over their current tax income bracket. That means that any earnings above the current bracket will be taxed more heavily and produce fewer earnings overall, and the differences in tax brackets can be staggering. The 2021 brackets for marginal rates are 12 percent taxes on income over $9,950, but 22 percent for income over $40,425 (and increases for income of over $86k). For some, the effort of working an additional job might not be worth the added taxable income.