15 Freelance Tax Deductions
When tax season rolls around, people get anxious about getting refunds or dread having to pay. Whether you expect money coming in or going out, the amount can be affected by whether or not you properly claim your freelance deductions.
One reason you may not properly claim deductions is because you may not know what you can claim. Here’s a list of some expenses a freelancer can write off.
Equipment: Any physical items you use to get your work done are tax-deductible. Many people realize this about electronics, such as computers, tablets, cameras, and memory cards. But, remember, it also includes your desk, office chair, and small items like organizers, pens, and thumbtacks.
However, you’re only supposed to deduct the percentage of the value that represents business use. So, if you buy a phone and use it half the time for work and half the time for personal, you’re only supposed to deduct 50% of the price.
Rent/ home office: If you rent an office, studio, or shared workspace, you can deduct those costs from your taxes.
If you have a home office, you can deduct a portion of your mortgage or rent. But, you must have an area that’s designated only for your work. And, be careful about claiming in-home office space. Many tax professionals cite it as magnet for tax audits.
Utilities: If your workspace is outside of your home, you can deduct 100% of the costs for electricity, heating, and cooling.
If your workspace is in your home, that’s another situation where you can file a deduction, but you have to calculate it based on the percentage of your home that’s used for business.
Health insurance premiums: One of the perks of being self-employed is that that you can deduct the full amount of premium for medical, dental, and long-term care insurance for you, your spouse, and your dependents.
Professional development: The government understands that the best way to stay on your A-game and earning more money for Uncle Sam is to sharpen your skills and stay in-the-know. So, classes, seminars, conferences, and membership fees for professional organizations are tax deductions for freelancers.
Travel: If you travel to cover stories, take photos, meet with clients, or attend conferences, you can deduct a portion of the money you spend on everything from lodging and parking to entertaining your clients.
Software: Did you pay for Microsoft Office, Photoshop, security software, or invoicing apps? If you did so for your business, it’s a tax write-off.
Business meals: You can deduct 50% of food and beverage purchases related to your business. That includes meals to meet with clients or days when your Internet service is down and you have to scuttle to a coffee shop to get your work done.
Transportation: Whether you drive your car, take a cab or Uber, or hop on a train or plane, if you’re moving around for business, including meetings with prospective clients, it’s a freelance tax deduction.
Professional services: If you met with an accountant, had your taxes prepared, or paid costs for legal services related to your business, you can write off those expenses.
Also Read: 6 Freelance Tax Mistakes To Avoid
Marketing: The costs of items you use to advertise your services and products are tax-deductible. That includes expenses for your website, business cards, promotional gear, or any other marketing items.
Subscriptions and business services: Magazine subscriptions and bills, such as your phone or Internet service, are deductible. You can even deduct the cost of Amazon Prime if you rely on it for business-related shipping or streaming services.
Again, you’re only supposed to deduct the percentage of a bill that’s related to your business.
Reference materials: If you have to buy guides, reports, or pay for access to databases to get your work done, those costs are tax-deductible.
Transaction fees: If you receive payments through sources such as Paypal, any fees that they charge are tax-deductible. You can also write off banking fees, including fees for ATM withdrawals to pay yourself or people who do work for you.
Unpaid invoices: I’ve talked about what to do about unpaid invoices before. One smart thing to do is write them off on your taxes as a business loss.
This isn’t a full list of the freelance tax deductions. Depending on your field and how you operate, there could be many more things to write off on your taxes. But hopefully, this list helps.