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Working for yourself offers unparalleled freedom, but it comes with a tax burden. As a freelancer or side hustler, you are subject to self-employment tax in addition to income tax. Fortunately, the IRS allows you to deduct ordinary and necessary business expenses to lower your taxable income.
By claiming these top 5 freelancer tax deductions, you can keep more of your hard-earned money.
1. The Home Office Deduction
If you use a portion of your home exclusively and regularly for your business, you can write it off. The simplified method allows you to deduct $5 per square foot of your home office, up to a maximum of $1,500. Alternatively, you can calculate the actual expenses (rent, utilities, insurance) based on the percentage of square footage your office occupies.
2. Internet and Phone Bills
You can deduct the portion of your internet and phone bills that is used directly for business. If you use your phone 60% for work and 40% for personal calls, you can write off 60% of the monthly bill. For complete IRS guidelines, visit the IRS Website.
3. Ordinary Business Deductions
| Deduction | What’s Covered | Primary Requirement |
|---|---|---|
| Software & Subscriptions | QuickBooks, Adobe, Zoom, hosting | Used directly for business operations |
| Health Insurance | Medical and dental premiums | Only if you aren’t eligible for an employer plan |
| Marketing & Ads | Google ads, website building fees | Expenses incurred to acquire customers |
To learn how to manage your business expenses on a dedicated card, see Strategic Credit Card Management. To invest your business profits tax-efficiently, check out our Retirement Account Guide.
Conclusion
Claiming legitimate business deductions is the best way to offset self-employment taxes. Keep meticulous records and receipts to ensure you are protected in the event of an audit.
