7 Tax Deductible Expenses for the Freelancer
As a freelancer you may like getting a head start on your taxes, since there is more record keeping involved, which means more work for you. Luckily, as you’re getting prepared to file your taxes this year as a freelancer or in proper terms a “sole proprietor”, you may not be aware that you can take a lot of small business related tax reductions. Here are seven tax-deductible expenses as a freelance writer.
Many freelancers, especially those that write, run a pretty lightweight business when it comes to their expenses. All you really need is a laptop, and perhaps some stationary and coffee. However, even if you don’t end up spending hundreds of dollars each month on your freelance business it doesn’t mean you don’t have a few business expenses that you can write off. For instance, if you purchase a filing cabinet, postage stamps, printer paper, letterhead, pens and other business related items then these could all be written off on your taxes for business purposes. However, you must earmark all these items as business-use only, and so ensure that no one else uses those items. Additionally, ensure that you keep an accurate record of these expenses, as it can be tricky remembering how much you spend throughout the year.
Typically the most common business expense for freelance writers is their computer or laptop. These types of items are considered to be capital expenses, which means their investments in your business. As long as the equipment is necessary for your line of work, you’re set. There are a few different ways you can write off equipment expenses. Either you can write of the entire expense during the year that you purchase the equipment, or you can deduct a depreciated amount over a five-year span.
If you utilize a business service then you can write those expenses off as well. For instance, if you use PayPal, it will cost money out of what your clients pay you in order to transfer it into your bank, and so this can be written off as a business expense. Your Internet service is another service to consider as a write off, as well as an extra phone line for your business if you have one. Keep in mind that in order to write-off your Internet service, you must write-off the percentage that you use it for work.
Deducting your home office can be quite tricky due to the fact that qualifying a home office requires that it be solely used as a workspace, and nothing more. This means that if you consistently work from your dining room table, you won’t be able to write this off as a business expense. However, if you get your own separate room in order to complete your work than you can qualify for a home office deduction. Keep in mind that you must use this office space regularly and exclusively for your freelance work in order to qualify.
Even if you didn’t have any swanky conferences to attend this year, you may still be able to write off a few of your travel expenses. For example, if you drove somewhere in order to do an interview for a writing assignment or in order to meet a new client in person then you can write the mileage for the trip off. Additionally, if you take any of your clients out to dinner or even simply grab them a coffee then you can write this off as a business expense.
If you own a small business or are a sole proprietor and weren’t able to join in on an employer-subsidized insurance plan through your day job or spouse then you can likely write off your health insurance costs. In fact, if there was no one in your family who could participate in a health plan that is employer sponsored then you can write off the premiums for everyone’s health insurance.
One of the best ways to reduce your tax liability as a freelance writer is to contribute money into a tax-advantaged retirement fund, such as a SEP IRA or a 401(k). If it comes time to file your taxes and you find that you owe a substantial amount to the IRS then you may want to consider putting some of your extra money into a retirement account. In fact, you can contribute as much as $17,500 into it and have it written off.
Many business owners attempt to cheat the tax system by taking out deductions that aren’t accurate. However, doing this will only set you up for problems in the long term. Instead, make sure that you only take the deductions that you’re allowed to and nothing else.
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