College students keen to pick up a little extra cash over their winter break may find that the gig economy offers easy money.
Care.com looked at demand in major metro areas over last year’s winter break — Dec. 15, 2015, to Jan. 15, 2016 — for popular jobs like babysitting, pet sitting, errand running and tutoring. Demand often outstripped the number of workers, allowing eager students to rack up as much as $1,500 over that month off from school.
(See chart for a breakdown of potential earnings in cities with the most demand.)
But before you hang out a shingle, consider the potential tax consequences.
“It’s a great way to pick up a little extra money, but the tax man doesn’t see it that way,” said Tim Gagnon, an associate professor of accounting at Northeastern University. “Any income you have has to be reported.”
If your parents claim you as a dependent, you may be exempt from filing a return if your earnings fall under set thresholds. According to IRS rules, dependents with more than $6,300 (the standard deduction) in earned income must file a return. Dependents with self-employment income — yes, babysitting and dog walking count — must file if they have at least $400 in income from such endeavors.
Combined with summer work and an on-campus job, you could potentially owe federal or state taxes on some of your income, said Gagnon. You’d also owe self-employment tax if your gig earnings exceed $400.
“That’s a separate tax,” he said, one that could amount to roughly $250 on winter break earnings of $1,500.
Parents of working college students should also pay attention to student earnings when it comes time to file the Free Application for Federal Student Aid. The formula expects that half of income the student earns will be used to pay for college, so earnings could have animpact on the amount of aid received.