Track your expenses
As a freelancer, you can use deductible business expenses to reduce the amount of tax you'll pay on your freelancing income. The type of costs you can deduct depends on the kind of work you do after all, the expenses of a rideshare driver may be very different from those of a freelance web developer. Here are a few common expenses that many freelancers claim:
- Bank fees
- Business meals
- Cell phone data plan
- Computer hardware and software
- Dues and subscriptions
- Education and training
- Internet service
- Legal fees
- Office supplies
- Vehicle mileage
For many freelancers, the pain of tax time isn't the amount they owe or even preparing their tax return, but gathering all of the information needed to get started.
Throughout the year and especially at tax time you'll receive a lot of receipts, tax forms, and other documents in the mail or your email inbox. Get in the habit of keeping everything in one place. Designate a file folder or a spot on your computer hard drive. Each time you receive a new document, save it there. This simple habit will make it quick and easy to pull everything together at tax time.
Tax season only comes around once a year, but don't wait until April to start thinking about your tax situation. Familiarize yourself with the tax forms and rules, and keep good records. And don't hesitate to reach out to a tax pro if you need more help dealing with your freelance taxes.