TurboTax / Tax Calculators & Tips / All Tax Guides / Self Employment Taxes / A Freelancer's Guide to Taxes

A Freelancer's Guide to Taxes

Updated for Tax Year 2016


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.

Get every deduction you deserve

TurboTax Deluxe searches more than 350 tax deductions and credits so you get your maximum refund, guaranteed.

For only $54.99*
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 (1040EZ/1040A) + $0 state offer only available with TurboTax Federal 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 expected in March. Special discount offers may not be valid for mobile in-app purchases.
  • QuickBooks Self-Employed Offer with TurboTax Self-Employed: File your 2016 TurboTax Self-Employed return between 4/19/17 and 10/16/17 to receive your complimentary subscription to QuickBooks Self-Employed until 10/31/18. Activation by 12/31/17 required. Sign in to QuickBooks Self-Employed via mobile app or at https://selfemployed.intuit.com/turbotax; e-mail address used for activation and sign-in. Offer valid only for new QuickBooks Self-Employed customers. See QuickBooks.com for price comparison.
    • When you use TurboTax Self-Employed to file your 2017 taxes, you will have the option to renew your QuickBooks Self-Employed subscription. If you do not purchase TurboTax Self-Employed by 10/15/18, you will have the option of renewing your QuickBooks Self-Employed subscription by 10/31/18 for another year at the then-current annual subscription rate. You may cancel your subscription at any time from within the QuickBooks Self-Employed billing section.
  • Pays for itself (TurboTax Self-Employed): Estimates based on deductible business expenses calculated at the self-employment tax income rate (15%) for tax year 2016. Actual results will vary based on your tax situation.
  • Anytime, anywhere: Internet access required; standard message and 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: $X.XX Refund Processing Service fee applies to this payment method. Prices are subject to change without notice.
  • TurboTax Expert Help, Tax Advice and SmartLook: Included with Deluxe, Premier and Self-Employed (via phone or on-screen); not included with Federal Free Edition (but available for purchase with the Plus bundle). SmartLook on-screen help is available on a PC, laptop or the TurboTax mobile app. TurboTax experts provide general advice, customer service and product help; tax advice provided only by credentialed CPAs, enrolled agents and tax attorneys. Feature availability varies by device. State tax advice is free. Service, area of expertise, experience levels, hours of operation and availability vary, and are subject to restriction and change without notice.
  • Tax Return Access, My Docs and My Analysis & Advice features: Access to all tax-related documents we have on file for you is available until you file your 2017 tax return or through 10/31/2018, whichever comes first. 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 2015 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.
  • 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 expected in March. 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: $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 2015 TurboTax products.
  • Data Import: Imports financial data from participating companies. Quicken and QuickBooks import not available with TurboTax installed on a Mac. Imports from Quicken (2015 and higher) and QuickBooks Desktop (2011 and higher); both Windows only. Quicken import not available for TurboTax Business. Quicken products provided by Quicken Inc., Quicken import subject to change.