Tax Deductions You May Be Eligible for as a Freelancer
Tax season can be a stressful time, especially for freelancers who might owe taxes at the end of the year. It can be overwhelming to look at the tax debt you owe from the profits you have made.
Our firm specializes in tax resolution and helping people who owe the IRS or state $10,000 or more. We’ve seen small business owners and freelancers get blindsided every year by a huge tax bill and often falling behind on their taxes for years on end. If that’s you, we can help. Contact our firm today to discuss your tax debt settlement options
So, if you're worried about how you're going to pay your tax bill this year, try to relax. There are a wide variety of legitimate deductions you can utilize as a freelancer to bring your tax liability down. We encourage you to talk to a tax professional to see if any of the following deductions apply to you.
Home Office
If you have a home office, you will be able to deduct a part of your rent or home expenses as an expense for your business. Be careful though, home office deductions may require a dedicated office space so speak to a tax consultant to find out if you qualify. In addition to your home office, you can deduct any related office supplies you used over the year. Keep the receipts for paper, ink, and any other home office supplies you've purchased. You should also be able to deduct any technology you bought specifically for work. If you have a work computer, internet, and office furniture, those can maybe qualify you for a tax deduction. Furthermore, you can deduct any expensive software programs you need to purchase for work like adobe photoshop or your word processor.
Insurance Premiums
If you work from home, you may be able to deduct your health insurance costs or any other insurance that is required for your job. If you have to purchase liability or malpractice insurance, that is a work-related deduction.
Travel Costs
If your work requires you to travel, the cost of that travel is a deduction. Hotel costs, mileage, and even food you eat during work trips are deductible expenses. However, if you are partially traveling for work and luxury at the same time you have to be careful. Any portion of your trip used for a personal vacation is not a deduction. You can only deduct expenses that are specific to your work costs.
Advertisement Expenses
If you've spent any money advertising your business, you can use that expense as a write-off. Any type of advertisement will qualify as a deduction whether you created online ads or utilized influencer marketing for sponsored posts. If you spent money on promoting your business, record that expense for your tax records.
Car Expenses
If your automobile is an integral part of your work, you can deduct expenses that are associated with it. You can itemize costs like auto insurance, gas, and any maintenance work you had to pay for. However, you can only deduct the expenses you utilized while working. If you used your business car as a personal car, you cannot deduct all of these expenses and will need to figure out the percentage of time you used your car to work.
Occupational Licenses
If your freelancing job requires you to pursue a license in your field then that license becomes a business expense. You may not have to renew your license annually but in the years you do pay to renew, you can deduct that from your tax costs.
Owe Back Taxes and Need Tax Relief?
While many of these tax breaks may seem incredibly appealing, filing them incorrectly can result in an audit or the IRS disallowing your deductions and charging you penalties and interest on your tax debt, making your problems worse.
If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.
Four Ways Freelancers and Gig Workers Can Trim Their Tax Bills
It is hard to beat the freedom and flexibility of freelancing and gig work. When you work for yourself, you can set your own hours, turn your home into an office and even ditch the daily commute.
All that is great, but there is one thing about freelancing that is much less pleasant. Compared to their corporate counterparts, self-employed individuals face an additional tax burden, an expense that takes many of them by surprise.
Note: If you end up falling behind on your taxes and the IRS or state claim you owe $10,000 or more, reach out to our tax resolution firm and we’ll schedule a free, no-obligation confidential consultation.
If you love the freedom of gig work but not the big tax bill, you need to think ahead. A little proactive planning can go a long way, so you can keep more of your hard-earned money in your pocket. Here are four smart strategies you can use to trim your tax liability and get more out of your freelancing and gig work.
#1. Fund a Health Savings Account
If you work for someone else, there is a good chance your boss picks up part of your health insurance costs, but freelancers and gig workers do not have that luxury. These self-employed individuals face additional challenges when it comes to health care, seeking affordable policies on the open market and saving money where they can.
One way the self-employed can save money and trim their tax bills is with a health savings account. Eligible individuals can contribute to a health savings account on a pre-tax basis, taking a serious tax deduction while making their health care more affordable. This tax savings can be a very big deal.
#2. Contribute to a Retirement Fund for the Self-Employed
Freelancers and gig workers need to look out for their own retirement, but there are plenty of options available. The annual contribution limits on retirement plans for the self-employed are among the most generous around, so you may be able to shelter a significant portion of your earnings from the tax man.
If you have a tax ID for your freelance business, you may be able to contribute to a solo 401(k). This plan works much the same as a traditional 401(k) plan, but the contribution limits could be even higher. Even if you do not have a tax ID, you can shelter part of your freelance or gig work income with a SEP-IRA or similar retirement plan.
#3. Take the Home Office Deduction
If you work out of your home, taking the home office deduction could save you a lot of money. If you are eligible for this valuable deduction, you could write off a portion of your property taxes and other home ownership costs, reducing your tax bill and keeping more money in your pocket.
There are specific rules regarding the home office deduction, so check with your tax preparer to make sure you qualify. If you can take the deduction, be sure to keep accurate records, and take photos of the office in your home.
#4. Push Income Into the Next Year
Freelance income can be notoriously unpredictable. One month is great, while the next is terrible. Yearly earnings can be just as variable, making tax planning difficult.
If you are having a particularly good year, you may be able to reduce your current tax bill by pushing some of that income into the following 12 months. When the end of the year approaches, delaying client invoices and moving income into the next year could save you money in the long run.
Once again, it is important to consult a tax professional before implementing this strategy. The IRS has established strict rules concerning income reporting, and you do not want to run afoul of the tax agency.
As a self-employed individual, you face some serious tax challenges, including the dreaded self-employment tax. That higher tax burden makes smart planning essential, and you can start that planning with the four tips listed above.
Owe Back Taxes and Need Tax Relief?
If you want an expert tax resolution specialist who knows how to navigate the IRS maze, reach out to our firm and we’ll schedule a no-obligation confidential consultation to explain your options to permanently resolve your tax problem.