In case you missed the "Twitter-view" last week with Martin Kamenski of RockstarCPA.com, one of the most popular questions for freelancers was about what you can legitimately deduct as a business expense, and therefore not be required to pay taxes on.
Q: What are the most important write offs for a freelancer?
A: They're ALL important, but the most overlooked deductions are:
- professional development
- home office
Home offices used to have to be 4 walls and a door. Now they can be a space in a bigger space, but it has to be two things: both REGULARLY and EXCLUSIVELY for work. If you don't have a space like that, see if you can make one! You will get to deduct a % of all utilities, rent, mortgage interest, property tax, and insurance. Take 100% of your internet.
Q: Can I still deduct business expenses when I file as an individual?
A: Absolutely! You can deduct almost everything that a corporation can deduct. It will go against your Self Employment income and knock down both the income tax and the self-employment tax you would otherwise pay.
And in a recent article, June Walker, specialist in taxes for the self employed and favorite speaker from Creative Freelancer Conference 2009, also encourages "indies" (her term for freelancers) to think carefully about what you may not be deducting but could. Here's an excerpt:
Take it to The Limit
To reduce your income take every possible legitimate business expense. Do this by reviewing everything you spent money on throughout the year. A visual artist — consider a Netflix deduction. A copywriter — what about an additional home office deduction for the kitchen corner used exclusively for writing while keeping an eye on dinner? A simple method of doing that is explained in The Confident Indie Keeps Awesome Records: Five Easy Steps.
If you’re paying a combined tax rate of 30% to 40%, then every $100 deduction could save you $30 to $40 in taxes. And, keep in mind, your loss can be deducted from other income, such as yours or your spouse’s wages or investment income. For a complimentary list of more than 100 typical and atypical business expenses, visit my site at 100+ Business Expenses To Help Reduce Your Taxes
And come hear Martin on this topic and more about taxes all about how to make money and keep most of it at this year's Creative Freelancer Conference (June 21-22, 2012 in Boston) where Martin will be speaking on "Getting the Money Right." Register by March 30 to get the $50 early bird discount!