Saturday, February 21, 2015

Tax deductions for Self-Employed and Freelancers

Ron Friedman for writes: Taxes for the self-employed and freelance worker can get pretty complicated. For those in this segment of the economy often combine their personal and business lives and, as a result, reporting to Uncle Sam can get pretty complicated. Freelancers usually work out of their own home, use their own car to get to and from sales calls and don’t have a separate bank account to conduct their business affairs.

Whether you prepare your own taxes or have someone prepare them for you, it’s still a good idea to know what deductions you might be entitled to. The following is a list of common tax deductions for those in their own business. Every profession and industry may have its own unique characteristics; here’s a general list of what is available to most:

Home Office: In order to qualify for the home office deduction, you must have a dedicated space devoted to your business and absolutely nothing else. Deducting the den in your house that contains the family computer and serves as a guest bedroom is an invitation for trouble. The deduction is calculated by the amount of square footage devoted to your office divided by the total square footage of your home. That fraction is applied to the costs of running your home will be the basis for your home office deduction.

Automobile: The deduction for use of your automobile is the greater of the actual costs of owning and maintaining it compared to the standard mileage rate the Internal Revenue Service publishes every year — 56 cents per mile for 2014. Actual expenses may include lease or loan payments, registration fees, insurance, gas, maintenance, repairs, garage fees and depreciation. The caveat here is that the only deductible portion of the costs are those associated with the business use of the automobile. It is advisable to maintain a car log or diary, to distinguish business miles from personal miles.

Meals and Entertainment: The rules regarding meals and entertainment can get fairly complicated, however, here are some guidelines to determine if the expense qualifies:
1)    The expenses has to be an ordinary and necessary expense that is common in your industry/profession and is helpful and appropriate to your business.
2)    The expense has to be directly related to your business, meaning it occurred in a business setting, or the primary goal was to do business or for a particular business outcome. It does NOT have to result in business transacted.

Equipment: Normally business equipment (phone systems, computers, furniture, copiers, scanners, etc.) is tax deductible (depreciable) over the useful life of the equipment. The IRS publishes tables covering all kinds of equipment and their related tax lives. However, one of the nuances in the tax code allows for 100% depreciation in the year of acquisition.

Retirement Contributions: While not directly a cost of business, the tax code allows those self-employed and freelance workers the ability to lower their tax bill by contributing to a retirement account. Whether one utilizes an IRA, SEP or KEOGH plan, those contributions can lower your overall tax bill.

Health insurance: Premiums paid for health insurance by freelancers are deductible. In fact, for those who are collecting Social Security while freelancing, your premiums paid for Medicare coverage are also deductible.

Insurance (other than health): Premiums paid for business insurance (general liability, errors and omission, malpractice, worker’s compensation, etc.) are deductible.

Advertising: Any expenditure for advertising and promotion of your business would fit into this category, including digital advertisements, business cards, promotional items, brochures, etc.

Fees and commissions: If your state or county requires you to carry a license or business certificate to do business, this is the place to deduct those expenditures.

Contract labor: This includes all the independent contractors and freelancers you hired to conduct your business and is separate from anyone whom you treated as an employee. It includes the computer consultant you hired to set up your network, or any subcontractors you used to create a final product.

Wages: If you hire someone in your business (assistant, administrator, etc.) even temporarily, you can deduct not only the wages you paid but also, the related payroll employment costs (employers’ share of Social Security and Medicare, Federal and State Unemployment Insurance, etc.).

Interest: If you borrowed money to start or expand your business, the interest you paid during the year is fully deductible.

Legal and professional services: Fees to lawyers and accountants used to initiate or continue a business are deductible, including bookkeeping and tax preparation.

The most important part of managing the financial operations of your business should be planning. Tax planning should be part of that. One of the key short term strategies employed is knowing when and how much to pay for your quarterly estimated taxes. It will go a long way to avoiding surprises come tax day and more importantly, penalties and interest to the government. Once you’ve gotten your business off the ground, you should talk to your accountant about ways to maximize cash flows and minimize taxes from year to year. Sole proprietorships are the most common business organization form for the self-employed, however, there are other corporate structures a freelancer can adopt and gain significant tax and legal advantages.


  1. this is a wonderful article i must sat, So much info given in it, These type of articles keeps the users interest in the website, keep on sharing more.
    Tax Return Services in Barking

  2. PAN Stands for Permanent Account Number. It’s used to identify Indian Tax Payers and can be used as Identity Proof too. It is unique for each and every PAN holder.

    Uti Pan Status

    Nsdl Pan Status

    ITR Status

    Aadhar card Status

    Voter Id card Status

    rashan card Status

    passport Status

  3. Would actually assist you in determining if you can afford a new house, car, boat etc. and just how much of a percentage of a down payment you should place, what is the best loan to value of your home.

    VAT Accounting Software in Qatar

  4. Get Shifting/Relocation Quotation from ###Packers and Movers Delhi. Packers and Movers Delhi 100% Affordable and Reliable ***Household Shifting Services. Compare Transportation Charges and Save Time, Verified and Trusted Packers and Movers in Delhi, Cheap and Safe Local, Domestic House Shifting @
    Packers And Movers Delhi

  5. Nice post!..good information,it is really really impressed me alot and i just loved it.Thanks for posting such an informative content: @
    Packers And Movers Mumbai


  6. Packers And Movers Bangalore Local Household Shifting Service, Get Free Best Price Quotes Local Packers and Movers in Bangalore List, Compare Charges, Save Money And Time at
    Local Packers And Movers Bangalore

  7. Local Packers and Movers Bangalore List, Get Best Price Quotes, Compare Movers and packers Charges, Top, Local Household Shifting Services. Packers And Movers Bangalore

  8. Excellent Blog. I really want to admire the quality of this post. I like the way of your presentation of ideas, views and valuable content. No doubt you are doing great work. I'll be waiting for your next post. Thanks .Keep it up!

    QuickBooks is a popular accounting software that helps in reducing paperwork and saves a lot of your time on bookkeeping.
    QuickBooks Online Support phone number
    QuickBooks Self-Employed
    QuickBooks Point Of Sale
    QuickBooks Desktop Pro
    QuickBooks Desktop Premier
    QuickBooks Desktop Enterprise
    Find a QuickBooks ProAdvisor

  9. This is truly a great read for me.I have bookmarked it and I am looking forward to reading new articles. Keep up the good work! kn95 mask RZR door bags polaris rzr door bags rzr rear view mirror umbrella bougerv

  10. This is really very nice post you shared, i like the post, thanks for sharing.. @ Local Packers And Movers Bangalore

  11. Packers and Movers Pune Provide High Quality ***Household Shifting, Home/Office Relocation, Insurance, Packing, Loading, ###Car Transportation Service Pune and High experiences, Top Rated, Safe and Reliable, Best and Secure Packers and Movers Pune Team List. Get ✔✔✔Affordable Rate Charts and Compare Quotation and Save Money and Time @ Packers And Movers Pune

  12. We Provide Local Packers And Movers Pune List for Get Best Price Quotes, Compare Charges, Save Money And Time, Top Household Shifting Services @ Packers And Movers Pune

  13. Packers and Movers Chennai Give Safe and Reliable ***Household Shifting Services in Chennai with Reasonable ###Packers and Movers Price Quotation. We Provide Household Shifting, Office Relocation, ✔✔✔ Local and Domestic Transportation Services, Affordable and Reliable Shifting Service Charges @ Packers And Movers Chennai

  14. I am highly impressed with your study on this topic. Really very interesting blog post you have shared here. Click here for more: Bookkeeping services

  15. Really I enjoy your site with effective and useful information. It is included very nice post with a lot of our resources.thanks for share. i enjoy this post.
    tax return for self-employment in barking

  16. Packers and Movers Bangalore - Reliable and Verified Household Shifting Service Providers Give Reasonable ###Packers and Movers Charges. Cheap and Best Office Relocation Compare Quotation for Assurance for Local and Domestic House Shifting and Get estimates today to save upto 20%, ***Read Customer Reviews - @ Packers And Movers Bangalore

  17. Thank you for sharing this article with us! I believe there will be more people like me, they can find many @ Packers and Movers Ahmedabad
    I am happy to find this post very useful for me, as it contains lot of information. I always prefer to read the quality content and this thing I found in you post.
    Click Here to Get More Sites
    Packers And Movers Surat
    Packers And Movers Gandhinagar

  18. Packers and Movers Chennai Give Safe and Reliable ***Household Shifting Services in Chennai with Reasonable ###Packers and Movers Price Quotation. We Provide Household Shifting, Office Relocation, ✔✔✔ Local and Domestic Transportation Services, Affordable and Reliable Shifting Service Charges @ Packers And Movers Chennai

  19. Thank you for sharing wonderful information with us to get some idea about that content.
    Tax Returns for Sole traders in Barking

  20. Packers and Movers Bangalore as a Services providing company can make all the difference to your ###Home Relocation experience. Bangalore based Company which offers versatile solutions, Right team that easily reduce the stress associated with a ✔✔✔Household Shifting, ***Vehicle Transportation. we help things run smoothly and reduce breakages and offer you seamless, Affordable, Reliable Shifting Services, Compare Shifting Charges. @ Packers And Movers Bangalore

  21. I am really enjoying reading your well written articles. I think you spend numerous effort and time updating your blog.
    Packers And Movers Pune

  22. Thank you so much for this blog. I really got useful news. First, I appreciate you for wrote this blog for us. I got best money manage app from Timelybills App. You people also try this app.

  23. Each kind of move is unique and needs to be handled as per move requirements. Cochin Household Movers simply move your packed items that you did yourself, load them to our specialized moving Commercial Trucks and unload to your new home. For self-packing, we provide the packing supplies you need. OR you can have our movers to pack, load, deliver, unload, place your furniture and Carton Box where you want, unpack and take away the used corrugated box kochi ernakulam.