How the Tax Code Shapes Your Side Hustle Loss Rules in 2026

In this episode of The Tax Policy Podcast, Lucas and Luna dive into the surprising rule change affecting side-hustle losses in 2026. Under the Tax Cuts and Jobs Act, excess business losses were limited for non-corporate taxpayers, and in 2026 those limits became permanent. The hosts explore what this means for the millions of Americans running a side business or freelance gig at a loss—often to offset W-2 income. Lucas explains the specific dollar thresholds: single filers can only deduct up to $540,000 in business losses in 2026, married joint filers $1,080,000. Luna brings up the case of a graphic designer who spent heavily on a new computer and software, expecting to deduct it all, only to find her loss capped. The conversation covers how the IRS treats hobby losses separately, the 'hobby loss rule' under Section 183, and why the IRS is stricter post-2017. Listeners will learn how to navigate the loss limitation maze, including strategies like tracking basis and passive activity rules. A clear, practical guide for anyone with a side project that hasn't turned profitable yet. #TaxPolicy #SideHustle #TaxLoss #IRS #TCJA #ExcessBusinessLoss #Section183 #HobbyLoss #SoleProprietor #Freelancer #TaxDeduction #BusinessLoss #PassiveActivity #Economics #TaxSeason #FexingoBusiness #BusinessPodcast #TaxTips Keep every episode free: buymeacoffee.com/fexingo