A Freelancer's Guide to Taxes

Updated for Tax Year 2017


OVERVIEW

Freelancing certainly has its benefits, but it can result in a few complications come tax time. The Internal Revenue Service considers freelancers to be self-employed, so if you earn income as a freelancer you must file your taxes as a business owner. While you can take additional deductions if you are self-employed, you'll also face additional taxes in the form of the self-employment tax. Here are things to consider as a freelancer when filing your taxes.


Income

Freelancer working on graphic design pad

Your first step as a freelancer is to gather and report all sources of your income. If you're like many freelancers, you have many sources of income.

Keeping track of all your income can be more difficult than if you were a traditional employee, in which case you'd get a single W-2 form for reporting purposes. As a freelancer, you're likely to get numerous 1099-MISC forms, one from each of your clients.

Self-employment tax

Photographer taking a picture

When you're self-employed, you are your own boss—which is great news until tax time. In addition to regular income tax, freelancers are responsible for paying the self-employment tax of 15.3%.

  • This tax represents the Social Security and Medicare taxes that ordinary employees have taken out of their paychecks automatically.

However, the amount also includes the employer portion of those taxes, since as a freelancer you are considered both an employee and an employer.

Tax liability

Money in a jar

The ultimate goal when you file your taxes is to reduce your liability to the lowest allowable amount. As a freelancer, you'll likely have more business expenses than a typical employee, and you can take a number of tax deductions not commonly allowed as a regular employee. However, you're only allowed to take deductions ordinary and necessary for the operation of your business.

Typical deduction categories

Freelance design studio

As a general rule of thumb, freelancers can write off expenses for:

  • business-related food
  • lodging
  • office expenses
  • required equipment or materials

The IRS guideline for freelancer tax deductions is that expenses must be ordinary and necessary.

  • If you would have an item even if you weren't running your freelance business, it likely would not qualify for a deduction.

Home office

Home office

Since most freelancers work from home, the home office deduction can apply. The IRS allows you to write off everything from rent to utilities for portions of your home that you use as an office.

The catch is that your office space must be exclusively used for your self-employment work; you can't "borrow" your kid's room from 9 to 5 and consider that space your home office.

Travel, entertainment, and meals

Airline overhead storage compartment

Travel, entertainment and meals are some of the trickier tax deductions as a freelancer.

  • You're allowed to deduct the costs of traveling to a job—with the exception being commuting to an office—and entertainment and meals with clients are also deductible, at a 50% rate.

However, you'll have to provide concrete evidence that those expenses are necessary for the development of your business. You can't simply write off your vacation costs as "business expenses."

Education and certifications

Reading a book

If you're a learning buff and your interests overlap with your profession, your educational costs may be tax deductible.

  • If you take classes to get certifications in your field or to enhance your business knowledge, you can typically write off those costs.
  • The same is true for any licensing, registration or certification costs you bear.

As with all freelance expenses, these deductions must directly relate to your business.

  • For example, you can't write off a class on gardening skills if you're a computer programmer nor can you write off education that trains you for a new career.

Equipment and supplies

Equipment and supplies

One of the downsides of being a freelancer is that you don't have an employer to buy you equipment and supplies, like a computer or a printer. However, if you need those items to perform your job, they're usually allowed as a deductible expense. Similarly, any other items or materials you need for your business can qualify for a deduction.

To avoid problems with the IRS, keep your business and personal expenses separate. For example, you might run into a gray area if you deduct your cell phone or Internet service while using them only partly for work.

Perfect for independent contractors
and businesses

Find more tax deductions so you can keep more of the money you earn with TurboTax Self-Employed.

For only $119.99$89.99*
Start for Free

Looking for more information?

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.


Security is built into everything we do
Here's how
* Important Offer Details and Disclosures
  • TURBOTAX ONLINE/MOBILE

  • Try for Free/Pay When You File: TurboTax online and mobile pricing is based on your tax situation and varies by product. Absolute Zero $0 federal (forms 1040EZ/1040A) + $0 state limited time offer only available with TurboTax Free Edition; offer may change or end at any time without notice. Actual prices are determined at the time of print or e-file and are subject to change without notice. Savings and price comparisons based on anticipated price increase. Special discount offers may not be valid for mobile in-app purchases.
  • QuickBooks Self-Employed Offer with TurboTax Self-Employed: To receive your complimentary subscription to QuickBooks Self-Employed through 4/30/19, you must pay for your 2017 TurboTax Self-Employed return by 4/17/18 and sign-in and access your QuickBooks Self-Employed account via mobile app or at https://selfemployed.intuit.com/turbotax at least twice by 7/15/18. You will have the option of renewing your QuickBooks Self-Employed subscription by 4/30/19 for another year at the then-current subscription rate. You may cancel your subscription at any time from within the QuickBooks Self-Employed billing section. See QuickBooks.com for price comparison. Offer not valid for existing QuickBooks Self-Employed subscribers already on a payment plan.
  • Pays for itself (TurboTax Self-Employed): Estimates based on deductible business expenses calculated at the self-employment tax income rate (15%) for tax year 2017. Actual results will vary based on your tax situation.
  • Anytime, anywhere: Internet access required; standard data rates apply to download and use mobile app.
  • Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
  • Pay for TurboTax out of your federal refund: A $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice.
  • TurboTax Help and Support: Access to a TurboTax specialist is included with TurboTax Deluxe, Premier, Self-Employed and TurboTax Live; not included with Free Edition (but is available as an upgrade). TurboTax specialists are available to provide general customer help and support using the TurboTax product. SmartLook on-screen help is available on a PC, laptop or the TurboTax mobile app. Service, area of expertise, experience levels, wait times, hours of operation and availability vary, and are subject to restriction and change without notice.
  • Tax Advice, Expert Review and TurboTax Live: Access to tax advice and Expert Review (the ability to have a Tax Expert review and/or sign your tax return) is included with TurboTax Live or as an upgrade from another version, and available through October 15, 2018. These services are provided only by credentialed CPAs, EAs or tax attorneys. State tax advice is free. Some tax topics or situations may not be included as part of this service, which shall be determined in the tax expert’s sole discretion. In the event your return is reviewed by a tax expert and requires a significant level of tax advice or actual preparation, the tax expert may be required to sign your return as the preparer at which point they will assume primary responsibility for the preparation of your return. Expert Review [and TurboTax Live] not available on the TurboTax mobile app or when using a web browser on your mobile phone. On-screen help is available on a PC, laptop or the TurboTax mobile app. Service, area of expertise, experience levels, wait times, hours of operation and availability vary, and are subject to restriction and change without notice.
  • Tax Return Access and My Docs features: Included with TurboTax Deluxe, Premier, Self-Employed, TurboTax Live or with PLUS benefits. Access to all tax-related documents we have on file for you is available through 10/31/2019. Terms and conditions may vary and are subject to change without notice.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2016 TurboTax products.
  • Most Popular: TurboTax Deluxe is our most popular product among TurboTax Online users with more complex tax situations.
  • CompleteCheck: Covered under the TurboTax accurate calculations and maximum refund guarantees.
  • #1 rated online tax prep provider: Based on independent comparison of the best online tax software by TopTenReviews.com March 13, 2017.
  • Get tips based on your tax and credit data to help get you to where you want to be: Tax and credit data accessed upon your consent.
  • TURBOTAX CD/DOWNLOAD SOFTWARE

  • TurboTax CD/Download products: Price includes tax preparation and printing of federal tax returns and free federal e-file of up to 5 federal tax returns. Additional fees apply for e-filing state returns. E-file fees do not apply to New York state returns. Savings and price comparison based on anticipated price increase. Prices subject to change without notice.
  • Fastest refund possible: Fastest tax refund with e-file and direct deposit; tax refund time frames will vary.
  • Pay for TurboTax out of your federal refund: A $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice. This benefit is available with TurboTax Federal products except TurboTax Business.
  • About our TurboTax Product Experts: Customer service and product support vary by time of year.
  • About our credentialed tax experts: Live tax advice via phone is included with Premier and Home & Business; fees apply for Basic and Deluxe customers. State tax advice is free. Service, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice. Not available for TurboTax Business customers.
  • #1 best-selling tax software: Based on aggregated sales data for all tax year 2016 TurboTax products.
  • Data Import: Imports financial data from participating companies; may require a free Intuit online account. Quicken and QuickBooks import not available with TurboTax installed on a Mac. Imports from Quicken (2016 and higher) and QuickBooks Desktop (2012 and higher); both Windows only. Quicken import not available for TurboTax Business. Quicken products provided by Quicken Inc., Quicken import subject to change.