Can you deduct AI tools for a side hustle?

Yes, often you can deduct AI tools for a side hustle in the U.S. if the expense is a legitimate business expense.

A common IRS standard is that the expense must be ordinary and necessary for the business. In practice, that usually means the tool is commonly used in your kind of work and is helpful or appropriate for earning income.

A few important limits:

1. It has to be a real business, not a hobby. If the activity is treated as a hobby rather than a profit-seeking business, deductions are generally limited or unavailable.
2. Only deduct the business-use portion. If you use an AI subscription for both personal and business purposes, only the business share is typically deductible.
3. Keep records. Save receipts, invoices, and notes showing how the tool is used in the side hustle.

AI tools such as chatbots, image generators, writing assistants, and coding assistants may qualify depending on how you use them in your business.

Tax treatment can vary by country and by your specific facts, so it’s smart to verify your situation with a CPA or tax professional before filing.