Karani Nyamu talks about there being a few reasons to envy the self-employed lifestyle; the increased tax preparation burden isn’t one of them. Not only must some freelancers file quarterly tax payments or risk penalties and fees, but they are also required to pay the portion of Social Security typically covered by an employer.
In light of this greater financial burden, self-employed people need to take advantage of all possible tax deductions to stay profitable.
Karani Nyamu highlights possible tax deductions that every freelancer should know about:
With a majority of consumers using the internet to research purchases, creating a mobile-friendly, responsive website is crucial for a freelancer’s success. Luckily, self-employed persons can deduct costs related to their business websites, including domain fees, design, building costs, and maintenance.
These days, most freelancers spend their days staring at computer screens. From sophisticated video editing programs to basic options like Microsoft Office and Adobe Acrobat, software can be expensive and hence makes a useful deduction for small business owners and freelancers.
Mileage and Gas
Do you regularly drive to meet clients or suppliers? If so, you should take advantage of the tax deductions available for costs related to vehicle mileage or normal vehicle wear and tear. You can choose between two types vehicle-related deductions: the standard mileage option or the actual expense option.
The standard mileage option allows you to make a deduction based on how many miles you’ve used for business purposes. The actual expense option allows you to figure out the cost of maintaining your car with respect to the actual cost of keeping it maintained for business use.
If your freelance business is successful, you may be thinking about incorporating in the near future. Filing taxes as a freelancer for the first time can be stressful. That stress can include not knowing what to do with your self-employed tax forms. However, by taking advantage of all possible deductions and understanding what’s expected of you, you can minimize your tax burden and give your business the chance it needs to grow.
As a freelancer, it’s important that you find ways to stand out from your competitors in the industry. To keep ahead of the pack, many freelancers attend classes and educational seminars.
Understanding that the cost of these expenses can add up, freelancers are allowed to deduct expenses related to professional development on their tax returns. Additionally, self-employed persons can write off dues for professional organizations and membership fees.
Advertising and Marketing
In our increasingly connected society, self-employed persons have to engage in marketing and advertising if they hope to stay competitive. Freelancers are permitted to write off the cost of flyers, web advertising, business cards and print ads among other marketing expenses.
Karani Nyamu also says that the more deductions you’re able to claim, the more earnings you’ll get to exempt from taxes. It pays to plan your deductions carefully to ensure you’re getting the maximum benefit.