Side Hustle Tussle: Local CPAs weigh in on oft-overlooked tax implications of gig work and STRs
February 2026
Passive income. Side hustles. The “gig economy.”
No matter what you call it, an increasingly large subset of American taxpayers is now making money in some fashion other than traditional employment. From short-term rentals (STRs) to popular gig economy apps like Uber, DoorDash, or TaskRabbit, these supplemental income streams have diversified the way people make money. They’ve also complicated tax returns for tens of millions of Americans, introducing a lot of pitfalls not there in a typical W-2 filing.
Just how common are side hustles locally, and what are the biggest tax implications that people should be aware of before diving into the STR or gig economy world? The TCBN sat down with a pair of local CPAs – Chris Kindlinger, president of Kindlinger & Company, PC; and Jenifer Carmody, tax supervisor at Dennis, Gartland & Niergarth – to get the answers.
Trend watch: What the national and local numbers say
Just how many Americans are branching out beyond traditional employment? There is no single statistic that answers that question, but there are a few numbers that offer some insight.
According to the U.S. Bureau of Labor Statistics, there were about 16.85 million self-employed Americans as of 2025, up from 15 million a decade prior. More than 10 million of those people were in unincorporated work situations (examples would include freelancers, sole proprietors and gig workers) while another 6.7 million had incorporated their own businesses. Together, the two groups account for more than 10% of the American workforce.
As for STRs, a 2024 report from software company Granicus reports 2.4 million STR listings in the U.S.
Locally, demographic data reported by the rental listings company Point2Homes estimates that 13.6% of the workforce in Grand Traverse County area is self-employed.
Data from STR analytics firm AirDNA, meanwhile, indicates that there are about 9,100 STRs active along the northern coast of Lower Michigan during the peak summer tourism months.
CarmodyThe tax experts weigh in
Both Kindlinger and Carmody say they’ve seen an uptick in recent years of clients diving into gig economy side hustles or STRs – particularly the latter.
“Around COVID and then a little bit after, there was a really big jump of everyone getting into STRs,” Carmody said. “It feels like it’s slowed down a little bit, but it’s still popular.”
“There is a whole lot of STR activity happening among our clientele, and there has been for quite a few years now,” Kindlinger concurred. “When it comes to the rest of the gig economy, usually those are smaller-income individuals, which is just not generally what we serve. But we know those people are out there, too.”
About half the time, Carmody says, DGN clients finding their way into the world of side hustles will sit down with the firm’s accountants ahead of time to talk through the tax dos and don’ts of their new endeavors. In the cases where those sit-downs don’t happen, though, mistakes are common – sometimes with costly consequences. Those errors exist both in the gig economy world and with STRs.
The tax risks of the gig economy
“On the gig side, probably one of the biggest things is that people don't always know they're supposed to report that income,” Carmody explained. “Maybe it’s a small dollar amount they made with DoorDash or Uber, and they assume they don’t need to report it. If they make more than $600, they will get a 1099 – a reporting statement from the company they work for that tells them how much they made for the year, but also tells the IRS how much they made. But even if they don't get that form, they’re still required to report that information, and a lot of people kind of aren't aware of that.”
In other cases, people make so much money through gig work or freelance jobs that they’ll end up with hefty self-employment taxes. Per the IRS, the self-employment tax rate is 15.3%, which covers Federal Insurance Contributions Act (FICA) taxes including Social Security and Medicare. In traditional employment situations, where the main tax form is a W-2 rather than a 1099, both the employer and the employee pay portions of these FICA taxes. Independent contractors have to cover both halves, hence the hefty nature of self-employment tax – and they have to do it on top of paying regular income tax.
Self-employment taxes also come with another obligation: that of paying quarterly tax estimates to the IRS. By apportioning out tax payments during the year, the quarterly obligation saves independent contractors from the sting of a massive tax bill come April each year – but only if they know about it.
Beginners in the self-employment world often don’t.
Kindlinger“People, a lot of the time, are just not ready for the self-employment tax, because the self-employment tax is almost 50% on top of income taxes for the net income,” Kindlinger said. “What happens a lot is people spend that money because they don't realize they need to be setting aside for the taxes, or they don't realize how much they need to set aside for taxes. Then they can't make their payment, so they’re on a payment plan, they've got penalties that are assessed both by the state of Michigan and the federal government for not paying their taxes on time, and interest keeps accruing.”
Knowing about the heftier tax burden of self-employment, Kindlinger says, is only half the battle. The other half? Claiming as many business deductions as possible to minimize tax liability. First-time independent contractors make mistakes there, too.
“They haven't kept their business and personal expenses separated very well. They haven't tracked their business expenses very well. They haven't tracked the mileage they’re driving for their business well enough. They haven't paid quarterly estimates, not realizing that there's no withholding in anything they’re getting paid,” Kindlinger said. “And then comes tax time, and they get hit hard. We tend to hear a lot of frustration from people the first year they’re self-employed, because they haven't planned well for it.”
To minimize those frustrations, Kindlinger recommends staying on top of estimated tax payments, tracking every business-related expense down to the transaction, using separate credit cards for business and personal expenses, and setting up a dedicated bank account specifically for gig work.
Talking to a tax expert is one way to get familiar with these types of best practices, but Carmody also says there “is a lot of good content out there” from popular gig companies like Uber and DoorDash that outlines many of these things in detail.
“It’s just a matter of spending a little bit of time to look at that stuff,” Carmody said.
Navigating the STR world
The good news for STR owners is that rentals don’t fall under the auspices of self-employment tax. The bad news is the tax obligations can still be complicated, in part because the rules vary depending on the geographic location of the rental.
The state of Michigan imposes a 6% use tax on any lodging rented for less than a month. In addition, STRs are sometimes subject to special local lodging taxes, such as to visitor’s bureaus like Traverse City Tourism (TCT). Traverse City area lodging businesses with at least 10 units are required to a 5% assessment of every booking to TCT, to support tourism promotion efforts, and that rule applies not just to hotels but also STR operators that clear the unit threshold.
According to Kindlinger, the common assumption among STR operators is that whichever rental site they’re using – the two most popular options being Airbnb and VRBO – will bill and remit the necessary use and lodging taxes automatically. That’s sometimes the case, but not always.
“Generally, both Airbnb and VRBO set it up so you can enter in the use tax rate for your area, or, if there's a visitor bureau tax, you can add in any of those things as well,” Kindlinger said. “But right now, there’s a court case going on where VRBO has sued the state of Michigan, saying they're not responsible for collecting those taxes; the state has said that they are. So we'll see where that comes out, but for now, if you're using VRBO, you'd have to remit the use tax and file those returns, and that’s in addition to an income tax return.”
Typically, Kindlinger says, his clients who own STRs hire management companies to handle things like cleaning and maintenance. Those businesses help take care of tax obligations as well. Whether it’s going that route or working with a tax expert to iron out details before listing a rental on the market, he advises that one of the main goals should be to avoid any and all end-of-the-year surprises.
“You don't want to wait until the last minute to find out, after the fact, that you haven’t been charging or remitting use tax,” Kindlinger said. “If you didn't think it applied to you and you didn't collect it, but now you have to pay it, that really can substantially impact whether you made any money for the year or not, because you still have to pay what you owe [the state].”
Beyond use tax, Carmody sees similarly big challenges in the STR world around deductions, write-offs and business losses.
“There is a lot of content out there on TikTok, Instagram, and Facebook implying that it’s easy to write off all of your losses from STRs, and that it's a great way to shelter income. And that's not always the case,” Carmody said. “There are some intricate rules, and you have to qualify for some specific categories that not everybody qualifies for. So, if you see a quick little TikTok video and then say, ‘Okay, I'm going to buy an STR, I'm going to have a loss on it, and then I'm going shelter a bunch of my income,’ you could be in for a rude awakening.”
Specifically, Carmody says that claiming a business loss from an STR is difficult for owners who treat their rentals mostly as passive income. IRS rules require a taxpayer to have a certain level of “material participation” in rental operations before that person can use STR losses to offset other earnings, and most operators don’t qualify.
“Say you have have a full-time job as a CPA, like myself,” Carmody explained. “If I have some STRs and I say, ‘Well, that's also my job, and I should be able to take losses.’ The IRS is going to say, ‘Wow, how can you have two full time jobs? That's pretty complicated.’ So, a lot of claiming losses from an STR has to do with the amount of time that you spent working with your STR, and some of it depends on what your job is. For example, a real estate person would have a lot more luck taking losses than a CPA or a physician, because that’s already what they do for a living.”
Writing off expenses is similarly complicated. Kindlinger gives the example of hiring someone to make repairs on an STR. A simple roof repair would be a reasonable write-off for a single tax year, while a full roof replacement would need to be taken as a deprecation deduction over a longer period of time.
“Because of things like that, STR owners will sometimes spend so much on their properties that they think they didn’t make any money that year [for tax purposes],” Kindlinger said. “The problem is, they can't deduct all of the money they spent in that particular year. So, even though they didn't get any cash, they still made income, and they still owe taxes.”
