7 Small Business Tax Deductions You Can Take As A Freelancer

7 Small Business Tax Deductions You Can Take as a Freelancer It’s just about that time of yr: tax time. Although you don’t should file your 2013 taxes until April, many freelancers wish to get a head start. I’m considered one of them. (Not the least as a result of I depart all my recordkeeping until the final minute, and don’t need to wait till April to figure out this 12 months’s whole revenue and expenses!) As you’re preparing to file your taxes as a freelancer (the technical tax time period is “sole proprietor”), you may not be aware that you just’re allowed to take many small-business-associated tax deductions. (Click here to tweet this thought.) So collect up that paperwork, and see if any of these small business deductions apply to you: 1. Basic Business Expenses Many freelancers â€" particularly the writing kind â€" run relatively lightweight companies, so far as expenses go. Give us a laptop computer, a bit of stationary and the ever present cup of espresso, and we’re good to go. But even should you don’t spend hundreds of dollars a month on your small business, chances are you could have some enterprise expenses. If you buy filing cabinets, printer paper, postage stamps, pens, letterhead or different business-associated objects, all these items can be written off on your taxes as a business expense. However, you do must earmark these gadgets that you write off as “business use only,” so make certain the youngsters don’t use your business printer paper as paper airplane fodder. Also, make sure you’re keeping correct records of those expenses, as it can be tough to remember simply how much you spend on them over the year. 2. Your Work Equipment One of the most common business bills for freelancers might be the laptop computer or computer. If you’re within the design field, you may have other very costly tools that you simply use for your business. These forms of objects are considered capital bills. They’re mainly investments in your business. As long as this tools is critical and normal for your line of labor, you’re good to go. There are a couple of different ways to put in writing off the expense of kit like computers. You can both write off the entire expense in the 12 months you purchase the gear, or you can deduct a depreciation quantity over 5 years. I’ve at all times accomplished the latter because the laptop computer I use for work, sadly, predates my writing enterprise. Since I already owned it when it started filing taxes as a freelancer, I had to take the depreciation deduction. You’ll have to do the same if you already owned your gear going into enterprise. However, one of nowadays once I actually buy a new laptop (or a tablet!), I’ll write off that complete expense in one year. Note that you could solely write off the complete price of this tools if it’s only ever used for work. If you employ your laptop to work and cruise Facebook or play video games or catch up on your favourite reveals on Netflix, you’ll only have the ability to write off a share of the equipment. It’s OK to make use of a tough estimate here, however attempt to be as accurate as you possibly can. If eighty% of the time you’re on your pill, you’re working, you possibly can write off 80% of the price/depreciation. If you only use it 40% of the time for work, you can solely write of forty% of the fee/depreciation. three. Business Services If you employ certain enterprise services, you'll be able to write off these expenses, too. My largest expense each year is actually in cash transfer charges. Since much of my enterprise is conducted through PayPal (and, previously, Elance), it prices me cash out of what my clients pay me to get my revenue to my checking account. In my line of labor, these services are quite reasonable, however they add as much as a very huge expense each year. So when you’re utilizing companies like these, remember to deduct their charges as a business expense. Other companies to contemplate writing off embody your Internet service and an extra telephone line for your small business. For the Internet, write off the proportion of your bill that matches the percentage of your Internet that you just use for business. In other phrases, if your Internet use is 50% work-related, you possibly can write off 50% of the bill for the months you were freelancing. 4. A Home Office The home office deduction is a difficult one, because to qualify as a home workplace, your workplace needs to be just that â€" a piece area, and a work area only. So should you work from the eating room desk on a regular basis, you'll be able to’t write off your eating room as a home office, since it will get used for different, private functions as nicely. However, when you’re fortunate enough to have a separate room that you simply use regularly and solely as a home office, you could qualify for the house office deduction. As a freelancer, right here’s what you need to qualify for this deduction: If you have a space in your house that meets these skills, congratulations! You can write off part of your hire or mortgage â€" in addition to part of your utilities â€" in your taxes. The typical way to take the home workplace deduction is to calculate the sq. footage of your office as a percentage of the general square footage of your own home. So in case you have a 2,000 square fo ot home with a ten’x10’ office room, your office is 5% of your own home. That means you would write off 5% of your mortgage/lease and certain utilities. This is a tough deduction, so try the actual IRS publication on it right here. 5. Travel Expenses Even should you didn’t make it to any swanky conferences this year, you might be able to write off some travel expenses on your taxes. For occasion, if you drive someplace to conduct an interview for an project or to meet a client in particular person, you can take mileage for the trip. (Here are the mileage rates for this year, in case you have been questioning.) Also, should you’re wining and dining new shoppers (or simply grabbing them a cup of coffee on you), take that out of your corporation. The IRS understands that sure types of leisure are business-associated, so you'll be able to deduct those meals as business bills. Again, these are tricky deductions, so you’ll want to take a look at the IRS publication on these business-related bills, as nicely. 6. Health Insurance If you’re a small business owner or sole proprietor and also you were unable to participate in an employer-sponsored health insurance plan via a partner or a day job, you can probably write off your health insurance premiums. If nobody else in your family may participate in an employer-sponsored well being plan, then you can write off premiums for everyone’s healthcare. 7. Retirement One excellent approach to reduce your tax legal responsibility as a sole proprietor is to contribute to a tax-advantaged retirement fund, like a SEP IRA or a Solo 401(k). As long as you set up a plan by December 31st of 2013, you can make 2013 contributions to the plan up to April fifteenth, 2014. So when you get to submitting your taxes and discover that you owe a ton of money, think about kicking some more money into your retirement account. (You can contribute up to $17,500 yourself, plus an extra employer match of up to 20% of your wage.) You’ll take cash out of your bank account either way, however a minimum of if you contribute to your retirement account, you’re not giving it all away to the IRS! Be Smart Many enterprise owners attempt to cheat the system by taking tax deductions they shouldn’t, but it will only set you up for hassle in the long term. Instead, take the deductions you’re allowed to take, and no extra. As lengthy as you keep good records, you’ll find that you could get some critical tax write-offs for your freelance enterprise! Freelancers, have you ever made full use of your tax deductions? Abby Hayes is a full-time freelance blogger, copywriter and journalist. She’s also the founder of FinanceforFreelance, a blog dedicated to helping freelancers take advantage of their cash. Check out her freelance tax information, forty two Money Saving Tax Deductions for Freelancers, when you’re ready to benefit from your freelancing earnings at tax time! Image: Flickr