Being self-employed has its pros and cons. On the plus side, you can generally set your own hours and maintain a more flexible schedule. On the other hand, as a freelancer, you give up the stability of a steady, guaranteed paycheck. And you also give up workplace benefits like paid time off and subsidized health insurance.
Another perk of being a freelancer, though, is being privy to certain deductions on your taxes that salaried workers can’t take. Mark Steber, Chief Tax Information Officer at Jackson Hewitt Tax Services, says, “There are many benefits that self-employed taxpayers can take that could boost your tax situation.” Here are some deductions you may be eligible to claim when you file your taxes.
1. Office supplies
You may need to stock your office with things like paper, ink for your printer, notepads, and pens. All of these expenses may be deductible on your tax return if they’re used for work purposes.
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2. Advertising expenses
Maybe you paid for a print ad in a local newspaper to drum up business. Or maybe you paid for some advertising on social media. Either way, that’s generally considered a business expense, since its purpose is to help you make money.
3. Rented equipment
When you rent equipment to do your job, it’s commonly an expense you can write off. Maybe you’re a self-employed landscaper and you had to rent a backhoe to finish a job at a client’s property. That rental may be something you can deduct.
4. Professional fees
Do you work with an accountant or bookkeeper regularly to keep your records in order? If so, the fees they charge you might serve as a tax deduction.
5. Membership dues
In your line of work, it might help you to join a professional organization. If you’re charged annual membership dues, those may be tax-deductible. The same could hold true for paid online workshops you attend or in-person conferences that charge a fee.
6. License fees
Some freelancers maintain professional licenses. If you’re an IT professional, for example, you may have certain certifications you need to renew yearly. Those license fees can generally be written off for tax purposes.
7. A home office deduction — in some cases
If you primarily work out of your home and you have an area of your home used solely for work purposes, then you may be eligible for a home office deduction. Steber explains that you have two options for taking this deduction.
The simple method has you taking a deduction of $5 per square foot of home office space, up to 300 square feet, for a total deduction of $1,500. You could also total your home expenses and deduct a proportionate amount based on how much space your office takes up relative to your home’s total square footage. So if your home office takes up 10% of your home, and your total home expenses (including things like utilities) come to $16,000, you could deduct $1,600.
Keep detailed tax records either way
Clearly, there are plenty of small business expenses you may be able to write off if you’re self-employed. But Steber warns, “It’s vital for freelancers and self-employed taxpayers to keep detailed records, including receipts, for all the expenses associated with their work.”
Guessing at a tax deduction, whether it’s one of the above examples or something else, is a great way to get your return audited. And that’s probably not something you want.
Plus, if you guess at one of your tax deductions, you might actually sell yourself short. You might think you only spent $80 on office supplies during the year when, in fact, your credit card records show a total of $105. It’s important to be accurate not just for the sake of avoiding an audit, but also, for the sake of getting the maximum tax benefit you’re entitled to.
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