Tax Deductions for Freelancers/Independent Contractors

The perks of freelance or contract work are aplenty. You get more freedom to do your best work, you can take on a diverse set of projects, and your paycheck won’t automatically have tax deductions. The drawback to that last point is apparent during tax season, however: you will eventually have to pay state, federal, and local taxes on the money you earned as a self-employed individual.

We want to help you pay only the taxes that are legally required and not more.  The best way for those with a side-hustle and those who work full-time as contractors/freelancers is to understand the deductions available to you.

Self-employment tax

The IRS essentially views you as a business. You will need to pay a self-employment tax which encompasses Medicare and Social Security taxes you’re required to pay. Normally, employees and businesses share these costs, but you are your own employee so you will need to pay the whole tax here.

However, this comes with its own backdoor. You can claim the portion (normally 50%) of this tax a business would normally cover for you as a tax deduction. This could be a large sum to claim depending on how much you make in a year, so this is a must when you file.

At-home business costs

You can benefit from most expenses you incur that allow you to work as a contractor or freelancer in your home office. There are limits, but essentially if you have an area in your home designated as your “office” where you operate all or most of your business, and you use that space exclusively for work, you should keep track of all expenses associated with the space. Your internet and phone bill can also be included as they are necessary for most modern work.

Work from home has become more common even for regular employees, so it’s important to read through what the IRS says to make sure you qualify for these deductions.

This can actually apply to your car, too. If you’re an Uber or Lyft driver, or you work for grocery and food delivery apps like Instacart or Doordash, you can deduct expenses like gas (or mileage) along with maintenance necessary to keep the car you use for business up to standard. Just keep in mind you can only claim gas and actual expenses OR mileage, you will not be able to claim both.

Travel and meals

If your work takes you on the road frequently, you should keep a record of all the travel costs (such as airfare and hotels) and food expenses you incur during travel. This could include trips to meet with clients, trips to fulfill client requests, and travel associated with your work as a contractor or freelancer.

This is where the freedom of being a freelancer or contractor could cost you, though. Your travel and lodging can only be expensed if it takes longer than a typical workday to complete. This typically means that it can be expensed only if you are required to spend the night away from home to do the work.  Because you don’t generally have a set 40-hour workweek like most employees, you will need to keep the time in mind when claiming these deductions.

Simplify the process by working with an attorneyTax season can be challenging for freelancers and contractors. We want to help you navigate the complexities of filing, so contact the legal team at Robert Boeshaar, Attorney at Law today. We’ve got extensive experience helping individuals and small businesses resolve their disputes with the IRS.