17 Important Tax Deductions for Freelancers

May 18, 2022

Nobody should pay more in taxes than they have to.

These are 17 different deductions you may be able to use to lower your tax bill:

Advertising & marketing

The IRS allows you to deduct reasonable advertising & marketing costs as long as they directly relate to your business

This could be:

• Sponsoring newsletters

• Running FB ads

• Promoting your course

• Business cards

• PPC ads

• Your website

Computer & tools

If you need a computer to work or require a camera to do your job, you can generally deduct the full costs if being used exclusively for business

Contractor Costs

If you hire someone to help with your website, designing graphics, etc, you can generally deduct the cost

Courses

If you buy a course that helps your freelance career, the cost is typically deductible

For example - if you bought Stefan Palios's Freelance Growth Blueprint course for $950 and you were making $75k, you may be able to save ~$200 on taxes

Home office space

If you work at home, your ability to deduct the space is capped at $1,500 per year based on $5/sq. foot for up to 300 square feet

Home office supplies

Can deduct the cost of notebooks, pens, desk accessories, etc. Recommended to keep receipts.

HSA contributions

If your insurance qualifies, you can deduct contributions up to $3,650 to a HSA (single filers)

Example - if you make $80k and max out the account ($3,650), assuming a 4% state tax rate, you may be able to save almost $950 on taxes

More: How to Save Money on Taxes with an HSA (Health Savings Account)

Insurance premiums

If you have net profit from self-employment, you are generally able to deduct health insurance premiums

Another example - if you make $75k and paid $4k in premiums, you may be able to save ~$880 in taxes

*if you have a partner with employer insurance, you may not qualify

Loan interest

If you needed to take out a loan to support growth or bridge an income gap, you can generally claim the interest paid as a deduction

Memberships & Communities

If you belong to a professional organization or community that helps your freelance career, the cost is generally deductible

Professional services

If you hire a professional, such as a CPA to handle taxes, you can generally deduct the cost related to the business

Phone & internet

Even if they aren't exclusively for business use, you can still deduct a percentage of their monthly costs as long as they're used for business purposes

QBI (Qualified Business Income)

Generally, you can deduct up to 20% of your qualified business income if taxable income is under $170,050 (for single filers) or $340,100 (for joint)

*Please speak with a tax pro before using this deduction*

Source: Do I Qualify For The 199A QBI Deduction?

Retirement contributions

If you contribute to a tax-advantaged retirement account, you can deduct your contributions

Self employment tax

Since self-employed workers are subject to the 15.3% self-employment tax, you're able to deduct up to half of the self-employment tax amount

Startup costs

When setting up your business, if you need to pay for licensing, permits, business formation, professional fees, etc., you can generally deduct the cost of the services up to $5,000

Transaction fees

If you're payment processor takes a percentage of payments, you can generally write-off these fees

Unpaid invoices

If you use accrual-basis accounting and reported an invoice as paid prior to receiving payment and paid taxes on it, you can write it off as bad debt in the following year if remained unpaid

Website & softwares

Whether it be your website, email tool, or premium social account, you can generally deduct the cost as they're helping you grow you're business

As always, you need to speak with a tax professional (CPA or EA) with experience in your type of business to help make sure everything is done right

Taxes aren't one-size-fits-all and certain deductions don't always apply to every situation

Related Posts