There are many benefits to going out on your own as a freelancer and benefiting fully from the fruits of our skills, talents, and knowledge. You get to work on your own terms, selecting the projects you do and do not want to work on, giving you the freedom to work how you want, where you want, and when you want. And as a freelancer, you can even find new ways to reduce your taxes, yes, we’re serious. Here are three tips and tricks that you can use as a freelancer to reduce your taxes.
Deduct Your Business Expenses
The first way that you can reduce your taxes as a freelancer is to deduct your business expenses from your taxable income. As a freelancer, you are technically self-employed, and as such, can deduct any and all expenses that you incur in the running of your business as a freelancer. This includes but is not limited to office supplies, business travel, licensing fees and membership fees, and a lot of other things. You can even deduct a portion of your rent every month if you have a dedicated home workspace that you use for your freelance work.
Put Money in a Retirement Plan
Another great way that you can reduce your taxes as a freelancer is to put money in a retirement plan. Everyone has access to opening their own Roth or Traditional IRA, but with yearly deposit caps of six thousand dollars, you may need another option to put away more for retirement. SEP-IRAs are often a first choice for self-employed business owners. These plans function similarly to a 401(k)-retirement plan but are not linked to anyone other than you as the employer. These plans can max out contributions at nearly ten times the size of a traditional or Roth IRA.
Health Insurance Deduction
The final way that you can reduce your taxes as a freelancer is by taking the health insurance deduction on your taxes. Most Americans get their health insurance through their employer, but if you are a freelancer, you are paying for your health insurance plan out of pocket. You can deduct the premiums for you, your spouse, and any dependents if you are a freelancer, who can save you thousands of dollars a year.
Working as a freelancer comes with a lot of perks, and one of them is additional tax benefits. But these tax benefits only work if you know how to take advantage of them. Learn more about these deductions and reduce your freelancer taxes.
Check out this article on incentives you can give employees to stay with your company!