Do you want to know what the hardest aspect of freelancing is? Everything is in your control, including advertising, customer service, and billing for clients.
Along with collecting your income and spending, you are responsible for handling every part of your income taxes, including completing and filing IRS forms. That assignment is probably the last thing on your mind given your hectic schedule.
Independent contractors can fortunately utilize a variety of tax deductions to lower their tax obligation. Take the initiative. Give tax planning an opportunity to assist you in annually saving hundreds of dollars. Your expected taxes may be calculated using an income tax calculator.
It’s critical that all independent contractors are aware of these 8 tax deductions.
Business lunches: If the lunch was directly linked to or affiliated with your firm, you might be able to claim the cost of it as a business expense as a sole proprietor. Usually, just 50% of the price of a business lunch may be saved.
Office equipment: Do you routinely copy or print documents? purchasing a printer? These office materials can also be deducted from taxes. Yes, even those expensive ink cartridges for printers! According to the law, certain office materials may only be used for tasks linked to employment. Desks and other office equipment are included in the list of office supply deductions.
You might be able to claim a tax deduction for the price of some office furniture even if you don’t have a specific space for it.
Physical Resources: Designers and other visual artists usually need to utilize physical tools in order to work. These costs are fully deductible as necessary business expenses on your Schedule C.
Online resources and programs: Do you personally utilize any online programs or resources? You do indeed pay for them. These costs can increase rapidly. If your company needs them, you can deduct them. Any software or online service you routinely use to operate your business can be written off as an expense on your tax return under Other Expenses.
Advertising expenses: This is another mistaken deduction. You can deduct any costs associated with business advertising. Online advertising usually overlooks this. As important as those that run on radio, TV, or billboards are PPC ads and other internet types of advertising. Everything is included in a section of your Form 1040, related to advertising deductions. You will need to closely manage your PPC expenditure because it won’t be a fixed cost.
Vehicle-related costs: If you use your automobile for work-related purposes, you may deduct the relevant costs. The IRS lets you deduct your business mileage if you often commute for work or if driving is part of your work. The best programs may be used to track your journey distance for each trip so that you have a record. If you are working for a third-party app like Uber or DoorDash, you must inquire if additional deductions like gas and motor maintenance are permitted.
Computers: The cost of your computer and any improvements you make to it are both tax deductible. If you use your computer for work, you can mention it as a deduction. It’s very important for freelancers to know of this deduction because you can mention it as a business cost. If you have a lot of costly computers used in your work, you should discuss depreciation with your tax expert. There is no harm in asking afterall.
Professional and legal services are frequently entirely deducted from income for independent contractors since they are a regular and necessary aspect of business operations. Fees for your accountant, lawyer, and any additional expert consultants you may engage are typically included in the cost of legal and professional services as a whole.
Finally, don’t be afraid to benefit from little savings. They can provide you the security you need to move forward with business acquisitions and help you save thousands of dollars on your ultimate tax payment. So, don’t worry about the self-employment tax. Take away whatever you can. You may use a tax bracket calculator if you’re unsure about your tax rate in 2022. You can use smart tax tools like FlyFin A.I. to find all your tax write-offs.