Filing taxes is tiring. It becomes more tiring when you are a freelancer. Like finding gigs was not enough, that you have to file tax for it too.
We understand that filing your taxes as a self-employed freelancer might seem like a universe-level disaster at first. But, once you get the idea of how things work, you will realize that it is not that of a universal threat that it may seem.
You learn your way around the tax filing and finally secure those helpful deductions. For this, all it takes are a few tax-saving tips for freelancers. Learn those, and you are set for life.
It doesn’t matter if you are a full-time or part-time freelancer. There are a lot of ways to save on taxes when you are self-employed. So, what are some of the top tax-saving tips for freelancers in 2024? To know that, check out our list of the smartest tax-saving strategies below. Make sure to read the article to the end, as we have ordered from the least to most effective for tax savings.
Please keep in mind that we have taken every step to ensure that this information about tax-saving tips in the USA is up-to-date and accurate.
However, it doesn’t include legal or tax advice. It should not be considered a substitute for legal or tax advice. When in doubt, always consult a tax expert or attorney for professional advice.
What are freelancer tax deductions?
Freelancers and independent contractors can deduct certain business-related expenses from their income to reduce their tax liability. And you don’t have to run a full-fledged business operation to qualify for the deductions.
According to the IRS, “to qualify for a tax write-off, a business expense must be “necessary and ordinary." As in, it must be a normal and appropriate cost for a business.
Top tax-saving tips for freelancers in 2024
Freelancing offers you flexibility and an income stream. But, as stated above, taxes can be a pain in the head. When you earn without an employer withholding taxes, you become responsible for estimating and paying your taxes to the IRS.
If you understate your annual tax obligations, you may find yourself in debt in the next tax season. But in that case, you can lower your tax liability by taking advantage of a number of freelancer-only tax deductions. So, to avoid that, use our tax-saving tips for freelancers and save those extra bucks.
Advertisement, marketing, and Internet-related expenses.
The cost of running advertisements for your work, designing your website, and keeping it up and running may be tax deductible. If you can prove to the IRS that your expenses are essential for your business, you are all set for a good tax return.
Supplies for office and work
The cost of supplies for office and work may be deductible. You can use this tax-saving tip in the USA and file for tax deduction on stationery stuff like print cartridges, pens, paper, and file storage.
Tax write-off on car costs
Self-employed freelancers may be able to deduct expenses for a vehicle used for business-related activities. These activities include depreciation, lease payments, gasoline, tires, insurance, and registration fees.
However, there is a condition, and you have to be cautious: If the car in the question is used for both personal and business purposes, you will have to calculate the percentage of use that is strictly for work. Otherwise, there may be an issue with the IRS, as it only allows you to deduct only business-related expenses.
Usually, you can opt from two methods to procure a tax write-off on your car expenses. One is the standard mileage rate, and the other is actual documented expenses. If both options work for you, choose the one that will give you a larger tax deduction.
Get business and health insurance.
Another tax-saving tip for freelancers is to get business and health insurance. Premiums for liability, malpractice, and other types of insurance for your business may be deductible. If you are a freelancer and meet certain criteria, you may also be able to write off your taxes in health insurance premiums for you, your spouse, and your dependents.
Deduct on business memberships
It does not matter if those memberships for country clubs and recreation centers drum up your business; you can't deduct those dues. However, memberships in the local chamber of commerce, professional organizations, or trade associations may qualify for a tax deduction.
Even education!
You can write off all the courses and other education-related expenses that are related to your business. You may be able to file a tax deduction if you travel for classes or attend a conference that is related to your business. For these tax-saving tips for freelancers in 2024 to work, you must be able to verify that education helps you maintain and improve your business skills or is required by law to help you stay in your profession or job.
Legal and Professional Fees
To make your freelance gig work, you need to hire a legal professional. They help you file a trademark or draft your freelancer contract. So, for those purposes, the fee plus the cost of accounting and bookkeeping services may be deductible.
Home Office for Tax Rescue
If you regularly use your home to meet with clients, you may be able to claim the tax returns through home office deduction. As per IRS, your home office should be a place where you regularly and exclusively conduct business. This could be a boon if you have chosen a home with an extra room or two to accommodate your business. Use this tax-saving tip in the USA and save on your home office expenses.
Use your retirement contributions.
If you contribute to a traditional IRA, SEP IRA, or SIMPLE IRA, you can have a tax break while simultaneously saving for your retirement. Just keep in mind that the exact deduction amount may be affected by how much you earn and whether you or your spouse is covered by a job-based retirement plan.
Other tax-saving tips for freelancers to keep in mind
There are a few more tips to remember if you are trying to write off freelancer expenses for the first time. Even when you want to make sure you have all your bases covered, try these tips.
- Keep good records of your expenses. This will ensure that you have a backup for each deduction you claim. If you can support your business expense due to a lack of documentation during an audit, that may cause you an additional tax liability.
- Set different financial accounts for business and personal activities. This will make it easier to keep track of all your business-related transactions. Mixing up both expenses together can create headaches. As it can be hard to determine which transactions aren’t personal. Follow these tax-saving tips for freelancers in 2024 and save your money.
- It is advisable to get help when you need it. Tax help does cost you a few hundred dollars, but you might be able to deduct the cost of tax prep services on your next tax return. Let’s be honest, you probably already have plenty on your plate between managing customers and jobs. You can handle each tax form for freelancers with less effort if you hire a tax expert.
- Try to think daily, not quarterly. Tax professionals advise self-employed freelancers to spend some time each day focusing on tax-related information. This includes updating income and expenditures as they come in. When you stay on top of your finances, your records are more accurate. You aren’t rushing around in panic the week before meeting your accountant.
Conclusion
It is a sure fact that filing taxes as a freelancer is overwhelming. But, with the right approach, you can simplify the process and maximize the savings. The tax-saving tips for freelancers in 2024 offer you a clear roadmap to reduce your tax liability.
From deducting office supplies, advertising, and marketing expenses to writing off car costs, these strategies can significantly minimize the burden of self-employment taxes.
Using your retirement contributions, education expenses, and home office deductions are additional ways to save. You can also take advantage of your business membership and legal and professional fees. This may qualify for deductions and help lighten your tax load.
To make the most of these tax-saving tips in the USA, it is crucial to maintain accurate records of your expenses. Separate your business and personal finances.
This is simply the tacking process and protects you from future tax liabilities during an audit. Remember, when in doubt, hire a tax professional. This is a worthwhile investment. With this, you might be able to deduct the cost of their services in the following tax year.
By following these tax-saving tips for freelancers, you can save money and ease the stress of tax season. You can focus more on building and expanding your business in 2024 and beyond.
Ultimately, taking time to learn these tips will lead to significant financial benefits. With proper planning, filing taxes does not have to be a burden but a strategic opportunity to save money.
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