Running your freelance business comes with a host of expenses — health insurance, purchasing your own office equipment and self-employment taxes to name a few. To offset the of additional costs of being a solopreneur, maxing out your tax deductions can help you lower your tax burden. When dealing with taxes as a freelance writer or other solopreneur, here are some expenses you can write-off:
Advertising and Marketing Costs
Expenses related to marketing your freelance business, such as marketing campaigns, business cards, domain names, website hosting, and maintenance can be tax deductible.
Any expenses related to business trips may be deducted, including the cost of airfare, transit, accommodations, parking, fuel, mileage and toll fees. Under the Tax Cuts & Jobs Acts (TCJA), you no longer will be able to write off certain travel costs. However, meals while traveling for business are still 50 percent deductible. Note that the IRS states the travel must be overnight, and at least 100 miles away from where you live.
Meals you had with clients when you were discussing work-related matters (and during business trips) can be deducted up to 50 percent. However, meals you enjoyed solo while working cannot be used as a write-off.
Costs to entertain for business purposes — such as taking a client out to a sporting event or out for a round of golf — can be deducted for 2017. But under the Tax Cuts & Jobs Act, you’ll no longer be able to deduct entertainment expenses.
The 15.3 percent you pay for Social Security and Medicare taxes can be deducted from your taxes.
Health Insurance Premiums
As a solopreneur, you can deduct the costs of health insurance, dental insurance, and long-term care policies.
Health Savings Account
If you have a health insurance plan that has a high deductible, it’s eligible for a Health Savings Account (HSA). Putting money away into an HSA can help lower your tax burden: The contribution limits in 2017 were $3,400 for an individual and $6,750 for a family. In 2018, the contribution limits got bumped up to $3,450 for an individual and $6,900 for a family.
Insurance policies you purchase to protect your business (i.e., liability, umbrella insurance, errors, and omission, etc.) can lower your tax burden.
If you work out of a space in your home, you can write that off for taxes. There are only two requirements for a home office deduction, explains Katherine Pomerantz, Owner and Chief Bean Counter at The Bookkeeping Artist. The space in your home must be 1) regularly and exclusively used for the business, and it must be 2) the principal place of your business. “If you want to claim a home office deduction, you must NOT use the space for anything else,” cautions Pomerantz.
In other words, working from your dining room table or couch doesn’t make it eligible to be a home office. However, you can count part of a room if there is some sort of partition, like a curtain or a standing screen that separates the business and personal space.
You also can’t count a home office if you have a secondary office somewhere else. An exception might be if you rent a co-working space for meetings. “Since that is a special event, your home is still your primary workspace,” says Pomerantz.
If you have a home office, utilities such as water, power, electricity, phone, and internet can all be deducted. Make sure you take your deduction proportionally: If your home office makes up 10 percent of the square footage of your home, you can deduct that percentage off your bill for taxes.
Office Supplies, Software, and Equipment
Supplies you use for your business — such as printer ink, a laptop, office desk, and cloud backup software — can be used as tax write-offs.
Vehicles and Transportation
If you use a car for business purposes, costs such as gas, registration fees, parking, insurance, and repairs can be deducted. One caveat: If you’re using the standard mileage rate for a vehicle, the only other expenses you’ll be able to deduct are parking and toll fees.
If you use public transit such as a bus or train for business reasons, this can be deducted too. Similarly, if you use a bike for the same purposes, you can deduct bike maintenance, repairs, and bike-sharing service fees.
Depreciation of Assets
The depreciation of business assets that last longer than a year can also be used to lower your tax burden. Some examples of where this can apply include:
- A car you use for your business
- Major office equipment
- Office furniture
In order to take this deduction, you’ll need to fill out Form 4562: Depreciation and Amortization. If you choose the “expensing deduction,” you’ll be able to deduct the full cost of both new and used assets that you bought that year. Note that if you use the standard mileage rate for transportation (above), you won’t be able to deduct depreciation of vehicles used for your business — choose one or the other. We recommend checking with a CPA or tax professional if you’re considering whether to depreciate an asset or expense the full purchase amount right away.
Conferences and Networking
Any expenses for professional conferences or networking events can be deducted when you’re self-employed. Note that starting in 2018, membership dues are no longer tax deductible.
Any costs toward your education that helps your business, such as a night class at the local college or online certification, can be a tax write-off.
If you consult a professional, such as a lawyer, accountant, SEO expert, or marketing professional for your business, you can write off those expenses.
Hiring Independent Contractors
Did you hire a WordPress guru to revamp your blog or do an audit of your site? Maybe you paid a graphic designer to design your new logo. Any fees you paid to independent contractors for business services can be deducted.
Bank fees and fees incurred when receiving payment from online services (e.g., PayPal, WePay, Stripe) can be deducted for taxes. You can also deduct online subscriptions relating to your work, such as that annual subscription to the AP Stylebook or Chicago Manual of Style. And gifts you send to clients can be deducted up to $25 per person.
What’s New for 2018
With the Tax Cuts & Jobs Act (TCJA), certain travel costs, entertainment expenses, business charitable contributions, and membership dues are no longer tax deductible, explains Pomerantz.
Plus, other deductions, like the interest deduction on your business loans, now have caps based on your total income. “So you may want to re-evaluate your spending and think twice before throwing that lavish client party,” says Pomerantz. However, she notes, “Even without these deductions, freelancers can still reduce their taxable income by donating to charities personally and by contributing to retirement accounts.”
Just remember that for an expense to be tax deductible, it needs to be ordinary and necessary. Yes, it’s a lot to keep track of and get your head around. Do you have questions about your freelance or solopreneur taxes? We’re here to help. You can speak to a representative at Incfile’s business taxes service for professional, personalized advice, and even get assistance filing your business taxes.