February 27, 2023
This guest post was written by Kenneth Boyd in 2021, an accounting and finance expert and the content manager at AIS-CPA. Boyd has 30-plus years of experience in financial services and accounting, been published in Inc., Investopedia and QuickBooks and is the owner of St. Louis Test Preparation.
This post on tax tips for freelance writers has been edited by Diana Kelly Levey in 2023.
*This blog post on taxes for freelancers is not a substitute for consulting with your accountant for professional tax advice on your taxes and learning more about tax write-offs for freelancers. Always check out the IRS’ website for the latest guidelines.*
As a freelancer, you’re entitled to claim tax credits and tax write-offs that will reduce the amount of taxes you’ll pay to the government. It’s one of the perks of being a freelancer, especially since you’ve likely been earning a gross income all year and might have to pay about 20 to 30 percent of that to the government at tax time.
While tax time tends to bring out confusion and anxiety among the self-employed set, getting your taxes done each year doesn’t have to be painful. I made this guide to help fellow freelancers navigate tax season to receive the highest returns at year’s end. (FYI, preparing ahead of time for taxes is one of the things successful freelancers wish they knew when they first started out.)
Here are some factors you need to keep in mind if you’re in need of freelance writer taxes advice:
Many of us want to reduce the liability that we’re obligated to pay taxes on. As a freelancer, one way to do that is to make sure you are recording the tax deductions that it takes to run your business. Remember, in order for these to be write-offs, they need to be “ordinary and necessary” to operate your freelance business. Here, a freelancer’s guide to taxes and tax write-offs.
Freelancers that spend a lot of time working from home can claim their home office as a write-off, but you must use that space often and exclusively for your business–so it can’t be your bedroom or your kids’ playroom. Follow this tax tip for freelance writers for details.
To calculate your home office, use the following two methods:
One of the favorite write-offs freelancers and independent contractors enjoy is to subtract 50 percent of the cost of some of your own meals as long as they’re considered ‘necessary and ordinary’ or if one of your employees is present during the dinner. Meals cannot be extravagant or lavish, so leave that expensive champagne off the bill. Not meeting up with clients in person yet? If you bought a client or fellow freelancer a meal to have during a Zoom meeting and you ordered food as well, a portion of your meal could be a write-off. If I meet up with a local editor at a coffee shop and have a drink and a snack, I’m tracking that in my expense sheet as a future tax write-off for freelance writers.
Since the IRS determines what is and isn’t deductible, it’s a good idea to keep your receipts handy in case of an audit. To limit paper and keep track easily, upload photos of your receipts to the Cloud so they’re at arm’s length should you need them.
You can also deduct travel expenses and you can write-off meals (up to 50 percent of the bill) as well as transportation costs. Meeting up with a client in another part of town and need to buy a train ticket? That’s a business expense. (Here’s how one freelancer earns a living as a travel writer.)
It’s common for freelancers to have a network of peers and potential clients obtained from chambers of commerce or business associations. If you’ve joined an organization that requires you to pay annual dues, you could write them off as long as that organization pertains to your freelance business. (Related: 5 Ways to Invest in Yourself without Spending a Ton of Money)
For example, a freelance graphic artist could write off dues associated with a local trade association for advertising professionals, but they can’t write off a country club membership even if they met clients at that location. Tax tips for freelance writers could be that a freelance membership to the American Society of Journalists and Authors is a write-off for their business. While it’s great to have these write-offs to reduce the amount of taxes you have to pay the government, make sure the expenses are worthwhile and help you net a profit in your business and make connections.
You likely use your phone a lot for both business and personal use. Freelancers can deduct some of their annual internet and phone bill based on the percentage used in their business. It can be a challenge to determine exactly how much of your internet and cellphone you’ve used for work, so only deduct what is considered reasonable. (Try these tips to save even more money as a freelancer.)
Keep an itemized list of your cell phone usage (yes, checking and responding to work emails counts) and figure out a reasonable percentage you can claim. Never deduct 100 percent of your cell phone bill unless you have a dedicated number associated with your business, or you’ll likely get audited. (Can you really prove that texting your mom on your cell phone was about a work matter every time?)
Freelancers may require advertising and marketing to promote their businesses. Whether you’re ordering business cards, enlisting the help of an SEO service, subscribing to LinkedIn Premium to find editors and marketing professionals, sending out freelance newsletters like I do, or maintaining your websites, you can deduct these costs–they’re one of the more popular tax tips for freelance writers! –as long as they promote what you’re selling or serve a purpose in your business.
You probably didn’t think you could profit off of your dying business equipment, but in some circumstances, you can receive some money back on your laptops or software. Depreciation is complicated and may require you to ask a professional accountant about what can be considered a write-off, but here are some key points you’ll need to get started in this tax tips for freelancers guide:
For a full list on which business equipment qualifies, go to section 179.org.
(Related: How You’ll Save and Spend Money by Working from Home)
Not all freelancers require business insurance, but many of us will purchase extra coverage to ensure they don’t receive any unexpected business expenses. Professional liability coverage, income protection insurance, business interruption insurance, and commercial property insurance are all covered, but some states let you write off other forms of insurance. Your freelance client might require you have business insurance as well. Make sure that the work you are doing for them is worth the insurance costs.
Sometimes you save more money by not having extra insurance, but that only applies to freelancers that don’t have clients walking in and out of their homes. If you purely operate online as a single entity, business insurance may not be the right option for you. (Check out Diana Kelly Levey’s e-book, 100+ Tips for Beginner Freelance Writers, for more must-have freelance business advice.)
Unless you have a spouse who receives health insurance through their full-time job, you can deduct a portion of your pay premiums. Freelancers don’t have the option of receiving medical insurance through their employers because we are our own employers. Thankfully, the IRS will let you deduct dental, health, and vision insurance.
Remember that if you qualify for health insurance deductibles, you can’t claim them on the same form as your other business expenses. Write in your deductible on Line 16 of Schedule 1 that’s attached to your 1040 form.
Now that you have your taxes covered, sign up for Diana Kelly Levey’s freelance coaching services to get your freelance writing in tip-top shape for the remainder of the year.
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