Those who work in regular offices generally don’t have to worry about filing their taxes. Most of the time, their employers handle all tax matters for them. For freelancers, taxation is often a problem because they have to do all the work themselves. Determining what is taxable and how much can get confusing if you are self-employed. If you are one of them, here are some tax tips for freelancers who work from home.
• Know the type of deductions to which you are entitled. Some of the common deductions available to self-employed individuals are automobile expenses, hired labor, inventory, office supplies, legal fees, accounting fees, postage and delivery, and advertising. Of course, it will depend on the type of freelance profession you are in. There are some professions that will allow a higher deduction for the self-employed.
• Try to deduct taxes on the business part of your home. If you’re working from home and have your own home office, there are some deductions you can take for the part of the house you use for work. You may have deductions on your mortgage, rent, utilities, renovation costs, insurance, and property taxes. The larger the portion you use for your business, the larger your deductions. If your home office is separate from the main home, the laws will apply to this separate office.
• When making deductions for hired labor, be sure to list all expenses incurred. This will include consultant and subcontractor fees. When making the list, be sure to use specific titles such as computer consultant or graphic consultant to label the workers. This is better than simply listing them as freelancers or contractors.
• Your credit card charges can also be deducted. This is one of those effective tax tips for self-employed people that many people know. If you’re using your credit card for business expenses, you can take some deductions from your annual fee. If you’ve taken out a loan from your credit card to use for your business, it may also be tax deductible. To make this easier, you should keep a specific and detailed record of all the business expenses you have incurred with your credit card.
• Make your computer work harder for you. In fact, you may have some deductions from your computer use, especially if you rely heavily on it for your business. The full cost of your computer and expenses related to repair and additional supplies may be deductible.
• Meals and entertainment can actually be deductible, as long as they are used for business. Breakfast and lunch meetings with clients, as well as occasional drinks or dinners, may have a 50% deductible. You can also count on those gifts you gave to your customers, up to a certain amount at least. Since these types of deductibles are very specific, you should always keep a clean and clear record of all the expenses you will incur.
