When tax season comes around, the average American often finds him or herself rushing to complete taxes. Given the complexity of the tax system in the United States, it is no wonder that many Americans have to hire a certified public accountant (CPA).
For the average American, IRS Form 1040 is the form used to file taxes. The employer will provide one with the W-2 form which can be provided to the CPA who will take care of the rest. A freelance worker has to file taxes a different way.
The Internal Revenue Service considers freelancers to be self-employed so freelance workers have to do their own taxes. While freelance workers can also use a CPA to assist them in filing their taxes, freelance workers must know how to maximize their deductions.
Can freelancers write certain expenses off their taxes? Yes! A home office is a common deduction. So are utility costs. Learn what all a freelancer can deduct.
Learn to Maximize Your Deductions as a Freelancer
If you are a freelance worker, you can write off expenses. The expenses you write off are known as business expenses. These are the expenses associated with the cost of operating a business.
The IRS allows freelancers to write off expenses for certain categories. These include office expenses, required equipment and materials, business-related food, and the use of the car for business-related purposes.
If your home is used as an office, you may be able to deduct expenses for the business use of your home. These expenses can include mortgage interest, insurance, and utilities. Keep in mind that if you plan to deduct a business expense, the IRS requires it to be both ordinary and necessary.
The Most Common Expenses to Write Off
As a freelancer, you need to know which expenses you can write off in your taxes. As noted, if you use your office as a home, you may be eligible for the home office deduction. To be eligible for this type of write off, you need to have a designated space in the house that is used exclusively for your business.
If this is the case, expenses made related to the office can be included in your taxes. These include furniture and equipment. This type of deduction can be made in different ways, so consult with your CAP.
Office Supplies
Consider all the office supplies you buy to run your business. If you buy ink for your printer and printing paper as well, you can deduct these expenses. If you plan on writing off these expenses make sure to save all of your receipts.
Travel Expenses
If your business requires you to travel, consider saving your receipts and airline ticket confirmations. Keep in mind that you can only claim this expense if it is business-related.
If you use your car to travel for business-related purposes, you can deduct the mileage. You need to keep a detailed track of your mileage so log your start and end mileage, as well as the destinations of your travel.
Education-Related Expenses
Learning never does end. If your business requires you to obtain more education or certification, you should consider writing off this expense. If you enroll in college courses, make sure to keep proof of the tuition payment.
Keep track of other education expenses too. These include textbooks. If you want to start a new career or a new business, you cannot claim this type of deduction.
Meals
Many freelancers do not know they can deduct a meal as a tax-deductible business expense. This can be done if you consumed a meal during business travel. While you might be thinking, “I will deduct the cost of a steak and lobster dinner,” the IRS will not allow you to do this.
The meal has to have a reasonable cost. Make sure you save all your receipts.
Memberships and Subscriptions
If you are a member of a qualified club, you may be able to deduct the membership dues. If you are a member of a trade association or a state board, you may be eligible for this write-off.
If you have subscriptions to journals or magazines that are related to your business, you may be able to deduct the cost of the subscriptions.
Business Insurance
If you have business insurance, the annual or monthly premium may be claimed as a business deduction. Consider the insurance paid for the car you use for your business. Also, consider if you pay for fire or flood insurance for your home office.
Important Things to Keep in Mind
Now that you are aware of some of the business expenses that you can write off as a freelancer, you should consider learning more about form 1099. You need to know how to prepare a 1099.
A 1099 is given to you by clients who have paid you over $400. There are different types of 1099 forms, so take the time to learn about these forms. This is a form that you will need to file your taxes.
If you are going to file your taxes, hire a CPA. A CPA will assist you in filing your taxes. This individual will make sure that you file your taxes so you can receive a maximum return.
If you are looking for a CPA, click on the following link: personal CPA near me. You will find the perfect CPA to work with.
Deducting Expenses as a Freelancer
As a freelancer, you have the ability to write off certain expenses you have made throughout the year. After reading over this guide, you should consider writing off business expenses of your taxes. The goal is to maximize your return.
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