Working as a freelancer has its ups and downs. Whether it be setting your own prices, schedule, or place of business, there are plenty of reasons to want to partake in the freelancer life. That is until tax time.
Tax time for freelancers can because of the money that goes towards taxes during this time.
Here are the employee tax deductions that you need to know about.
1. Self-Employment Tax
The dreadful part about working for yourself is the issue of the self-employment tax. It requires you to contribute the portion that an employer would normally contribute to your Social Security and Medicare.
The upside is that this is also a tax deduction. It counts as a business expense for those that are freelancers and allows you to deduct half of your self-employment tax from your net income.
For those that need their own paystubs for freelance work, check out https://www.thepaystubs.com/paystub-sample-templates.
2. Home Office
There is a reason that office is always closed up in a family home. This is because your home office needs to be dedicated to nothing but business.
You must first get the square footage of your home office and determine that portion compared to the square footage of your entire home. This percentage is then applied to your utilities, property taxes, and even home maintenance.
You could also opt for the simplified version where the IRS gives you their rate that you multiply for the square footage of your home.
3. Health Insurance Premiums
The other negative to working on your own is the health insurance premiums that you have to pay yourself. The benefit is that you can then deduct these premiums when it comes to tax time.
Any health, dental, vision, or other long-term care plans are included. This also means that if your spouse has health insurance under you, you can then deduct their portion of the insurance as well.
Continuing education is one of the best and most beneficial 1099 employee tax deductions out there. Any time you take the time to better yourself and learn new and important skills that cost money, it can be deducted.
Do note that the education must pertain to what your business is already in. You can not use this deduction for jumping into a new career.
5. Internet and Phone
Internet and phone are required for almost every single freelancer out there. Keeping your personal business out of your “business” business is the hard part.
You should look into getting a second line for business usage to completely deduct this phone line. Internet usage is hard because everything is connected to the internet, so just guestimating is the recommendation.
Employee Tax Deductions: Every Freelancers Bestfriend
Employee tax deductions always make tax time a little easier for all freelancers. The big pot of money that comes out of the bank during that time is never fun. Tax deductions can always make that number go down as far as possible.
If you want to learn more about business and economy, be sure to check out our other articles. You can also check here for more info on Tax Planning for Freelancers. If you know a freelancer that could use help during tax time, be sure to share this article with them.