10 Tax Deductions For Freelancers

Freelance Switch has 10 deductions freelancers can take. For instance, if you have a cellphone as a second line and primarily use it for business, deduct it. Work from home? There’s the complex but worth it home-office deduction. The “research” category is very useful, especially for journalists and writers. Just about any piece of entertainment can go in there. Hey, you got to keep in touch with the zeitgeist, right?’

10 Tax Deductions Freelancers Can Make [Freelance Switch via Lifehacker] (Photo: NabityPhotos)

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  1. Davan says:

    I thought it said freeloaders at first, I was like FINALLY a tax break for me

  2. philmin says:

    If you make a deduction, it goes through, and later you get randomly audited and that deduction is determined to be deceptive or fraudulent, what happens?

    Im specifically thinking of people who try to write off “just about any piece of entertainment” for supposedly being job related.

    • picardia says:

      @philmin: If you’re in the entertainment industry, the IRS will accept virtually any such expenses as job-related. I’m not going to deduct for my cable bill or Broadway tickets, but a LOT of the books that I bought were research-related this year, so you can bet my Amazon expenses are going on. What I’m most interested in right now is how much research I can deduct for my big vacation last year, which was primarily for pleasure but did have about three days’ worth of trips that are going into the material for something I’m trying to sell now. Hmmmm.

    • whinypurist says:

      @philmin: The article does seem to repeatedly say, “keep your receipts”. And actually, you don’t need to save your receipts, but for most people they tend to help when you are keeping the required “written documentation” of your expenses. Plus, you can just hand them over to your tax preparer and they can sort thru them.

      But many of the listed deductions do have some gotchas – The dual-use cell phone and home office and subcontracting, plus vehicle use and purchases of equipment. They are well worth learning about now, at the start of the year so you make sure you keep documentation you are confident you can use next year.

      And in contrast to deductions one takes against income to lower your income taxes (itemize deductions vs. standard deduction), these are business expenses write-offs against your earnings – important to anyone who has self employment income – because it can lower the ~12% self-employment tax.

    • exconsumer9 says:

      @philmin: If they audit you, they may not be able t@garfield1979: Percentages are allowed, and the onus would be on them to prove that you weren’t playing games on your computer. You’ll know ahead of time that you’re getting audited . . . so, well, there’s not much they can prove. As far as I know, if they want to do some kind of in depth investigation, they’d have to bring a case against you just like everybody else. As far as I know, getting audited just means the IRS asks for your receipts and bank records and verifies your tax return just as you or your accountant would. If you’ve claimed that your computer is for business use, and you’ve reported income from that business (there’s proof it exists and generates profit), there might not be much else to investigate in the eyes of the auditor.

    • Eyebrows McGee (now with double the baby!) says:

      @philmin: Records records records! I’m part-time self-employed, and I save EVERYTHING, from heating bills to office supply receipts, and dump it all on our CPA. (Often with a sticky note about why I suspect the office supplies are deductible or whatever.) Some things are too hard to document, so I just decide the $12 deduction isn’t worth the audit risk.

  3. bohemian says:

    Those entertainment type expenses have to be within reason. Buying a magazine related to the type of business you conduct would be. One for a totally unrelated subject matter would not.

  4. garfield1979 says:

    I was told that the in home business deductions (where you can deduct utilities, mortgage, etc) has to be 100% for in-home use.. i.e. you can’t even pay your home bills on that computer or play video games.
    That’s what I heard anyways. the IRS scrutinizes those deductions pretty carefully.

    • bbb111 says:

      @garfield1979: “I was told that the in home business deductions (where you can deduct utilities, mortgage, etc) has to be 100% for in-home use.. i.e. you can’t even pay your home bills on that computer or play video games.”

      Technically, that is true and if the auditor is determined to get you they can get pretty nasty. [I’ve heard some secondhand horror stories, but no firsthand accounts or studies.]
      Some people say that claiming a home office increases the chances of an audit.

      The part of home office deduction that is always left out of these articles is that every penny of the deduction for the actual office is depreciation (not expenses like heat, phone, electricity, etc.) so it reduces the basis of the house value; you will then owe taxes on that amount when you sell the house unless the value of that space decreases. PLUS, since that room is a business asset, the personal exclusion for capital gains on the sale of the house does not apply. You might end up paying more taxes in the long run [Your mileage may vary.].

  5. SJActress says:

    Professional actors (and I assume similar types of jobs) are allowed to deduct for gas to/from auditions and rehearsals, as well as make deductions for any clothing/wigs/makeup used as costuming. I suppose this would be similar to the “Job-hunting” deduction.

    Unfortunately, most of us don’t make enough to even require doing deductions!

  6. dannielo says:

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