20 Tips for Filing Taxes as a Freelancer
Mastering freelance taxes means maximizing deductions, staying ahead of deadlines, and keeping more of your hard-earned money while staying IRS-compliant!
- Alyana Aguja
- 6 min read
Filing taxes as a freelancer might seem daunting, but with careful planning and organization, you can reduce your tax burden and retain more of what you earn. From monitoring income and expenses to taking advantage of deductions, such as home office expenses, retirement savings, and business travel, every choice affects your goal. By remaining proactive with quarterly tax payments, using the appropriate financial resources and knowing important tax deductions, you can make tax season a chore to be endured instead of a financial disadvantage.
1. Keep Track of Every Dollar Earned
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The IRS considers all freelance income taxable, whether from side gigs or one-off projects. Use accounting software like QuickBooks or a simple spreadsheet to record every payment received. Forgetting to report even a small amount could trigger an audit.
2. Save for Taxes Throughout the Year
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Unlike regular employees, freelancers receive no taxes withheld from their salaries. A wise rule of thumb is to put aside at least 25-30% of your earnings in a separate savings account for taxes. This avoids the shock of a hefty bill when tax season arrives.
3. Know Your Quarterly Tax Deadlines
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Freelancers must pay estimated taxes four times a year (April, June, September, and January). Missing a deadline can result in penalties, increasing your tax burden. Mark these dates in your calendar and set reminders to avoid late fees.
4. Understand Self-Employment Tax
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As a freelancer, you must remit the employee and employer shares of Social Security and Medicare taxes (15.3%). This is on top of regular income tax, so planning for it is important. The good news is that you can claim half of this on your tax return.
5. Deduct Your Home Office (Legitimately!)
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If you have a dedicated room in your home solely for working, you can be eligible for the home office deduction. This allows you to deduct a percentage of your rent/mortgage, utilities, and internet. However, working at your kitchen table won’t cut it—make sure your work area is IRS-compliant.
6. Save Receipts for Business Expenses
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Any money you spend to operate your freelance business, such as software, supplies, and ads, can be claimed—store receipts in a file folder, either hard copy or digital, to support your assertions. Expensify or Wave apps can track expenses for you.
7. Maximize Your Retirement Contributions
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Deductions from a SEP IRA, Solo 401(k), or traditional IRA lower your taxable income. For example, in 2024, self-employed individuals could deduct up to 25% of their net earnings to a SEP IRA, a $69,000 limit. This lowers not only your taxes but also prepares your future.
8. Don’t Ignore Health Insurance Deductions
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If you’re paying for your medical insurance, you can deduct the premiums. It doesn’t matter if you don’t itemize deductions. It’s an above-the-line deduction, which directly reduces your taxable income.
9. Log Business Miles on Tax Return
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If you travel to client meetings, co-working spaces, or business events, you can deduct mileage (67 cents per mile in 2024). Record your business trips in a log format with the date, purpose, and miles traveled. Apps such as MileIQ or Everlance can do it automatically.
10. Deduct Professional Development Costs
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Online courses, conferences, and workshops on your work are tax-deductible. If you’re a graphic designer and went through an Adobe certification course, you can deduct it. Just ensure that it’s related to enhancing your skills for business.
11. Hire a Tax Professional if Needed
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Taxes are complicated, and errors cost money. A tax professional knowledgeable about self-employment taxes will help you take advantage of deductions and stay compliant. Their service is also tax-deductible as a business expense.
12. Learn About 1099-K and 1099-NEC Forms
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Clients paying you $600 or more will give you a 1099-NEC, and PayPal or Venmo send 1099-K forms if they process transactions that are over $20,000 and 200 transactions (as of 2024). If you don’t get these forms, you still have to report all your income. Using your own records keeps things accurate.
13. Don’t Forget Software Subscriptions
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Software such as Adobe Creative Cloud, Zoom, or Canva are all eligible if used for business. As a writer, your Grammarly or Scrivener subscription also qualifies. Those little deductions mount up and decrease your taxable income.
14. Keep Separate Personal and Business Finances
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Open a business checking account and use a credit card to separate funds. This will make expenses and tax filing much easier. It will also maintain professionalism when dealing with clients.
15. Deduct Internet and Phone Bills
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If you use your internet and phone for business, you can claim part of these expenses. Keep a record of the proportion of business usage to find the percentage deduction. Do not, however, claim 100% unless you use a work-specific phone or internet connection.
16. Pay Yourself a Salary for Better Budgeting
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Rather than withdrawing money at random from your business revenue, establish a standard “salary” to take out to your account. This keeps personal expenses in check and business finances solid. It also allows you to allocate enough for tax and reinvestment.
17. Deduct Client Entertainment and Meals
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If you take a client to lunch to talk business, you can deduct 50% of the expense. Save receipts and record the purpose of the meal in case of an audit. That $50 lunch doesn’t sound like a lot, but it adds up considerably in repeated deductions.
18. Plan for State and Local Taxes
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Some states have additional self-employment taxes or require business licenses for freelancers. If you live in California, for example, you may owe state taxes on top of federal ones. Check with your state’s tax agency to avoid surprises.
19. Take Advantage of the Section 179 Deduction
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Suppose you purchase business equipment such as a new computer, camera, or office furniture. In that case, you can deduct the entire expense in one year rather than depreciate it over several years. This reduces taxable income immediately. Just make sure it’s a legitimate business need.
20. Stay Organized Year-Round
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Don’t leave it to the last minute. Keep records up to date every month. Monitor spending by utilizing bookkeeping software, document cloud storage, and automated resources. The more streamlined you are, the simpler tax time will be.