Hey there freelancers! I know that tax time can be daunting, especially when you’re self-employed. But don’t worry, i’ve been there before and i’m here to help you out.
When you consider that your efforts can actually save you money, tax season takes on a new perspective.
Here are some basics of taking tax deductions as a freelancer.
What are tax deductions?
As a freelancer, you are eligible to deduct a variety of expenses on your taxes. These deductions can help reduce your taxable income and, as a result, lower your tax bill.
To deduct an expense, it must be considered “ordinary and necessary.” That means it’s common and accepted in your field, and it’s helpful and appropriate for your business. The IRS provides a list of common deductible expenses for business, which can be a helpful starting point.
In addition to expenses that are specific to your business, there are also some general deductions that all freelancers can take advantage of.
How do I keep track of my expenses?
Freelancers often have a lot of expenses that they can deduct from their taxes. Keeping track of these expenses can be a challenge, but it’s important to do so in order to maximize your deductions.
There are a few different ways to keep track of your expenses. You can use a spreadsheet, a notebook, or even an app on your phone. The most important thing isn’t how you keep track of them, it’s about being consistent over time.
It’s also a good idea to keep receipts for all of your expenses. This way, if you’re ever audited, you have the documentation to back up your deductions.
Best tax deductions for freelancers
When you’re a freelancer, taxes can be a bit more complicated than if you were employed by someone else. But, one of the benefits of being your own boss is that you may be able to take advantage of certain tax deductions that can help reduce your overall tax bill. Here are some of the most common tax deductions available for freelancers:
1. Home office deduction
You can deduct the percentage of your home used for business purposes as an office.
2. Health insurance deduction
You can deduct premiums you pay for self-employed health insurance.
3. State and local taxes
You can deduct state and local income or property taxes you pay.
4. Retirement plan contributions
You can make deductible contributions to an IRA, 401(k), or other employer-sponsored retirement plan.
5. Charitable donations tax deductions for freelancers
Any money that you donate to a qualified charity can be deducted from your taxes. This is a great way to reduce your tax bill and also help out a worthy cause.
6. Professional dues and subscriptions tax deduction
This includes membership fees to professional organizations as well as subscriptions to journals and other publications related to your work.
7. Business travel expenses tax deduction
As a freelancer, you are likely to incur a number of expenses related to business travel. However, you may be able to deduct some or all of these expenses on your taxes. To qualify for a business travel deduction, your travel must be directly related to your business. This means that your travel must be for a business meeting, conference, or other work-related event.
8. Education and training expenses tax deduction
The education and training expenses tax deduction allows you to deduct the cost of courses, seminars, books, and other materials related to your business. This deduction can be a great way to offset the cost of keeping your skills up to date.
9. Equipment and supplies tax deduction
If you use your own equipment and supplies for your freelance work, you can deduct a portion of the cost from your taxes. This can be a significant deduction if you have expensive equipment or a lot of supplies.
10. Vehicle expenses tax deduction
If you use your vehicle for business purposes, you can deduct a portion of your vehicle expenses, such as gas, insurance, and repairs. To qualify, you must keep careful records of your mileage and expenses.