If you’re a freelancer, you already know that you need to save roughly 30% of your income in order to prepare for tax filing every year. But, you’d still like to pay the least amount of money as possible to the federal government, so knowing what tax deductions you can make is a great idea. But figuring out the tax code is tricky. How can you save on taxes as a freelancer?
Deduct Expenses
Freelancers have a myriad of options for deductions, because almost everything you use is deductible. According to Merchant Maverick, this includes software you need for your business, the options of new equipment, even your printer and printer ink fall under the category of deductions. You need, though, to take good care of tracking your financials, and to use good accounting software. This gives you the option of using a professional tax advisor, which can help you when you need to scale up your business as well. Remember, you can defer income by not billing your clients until the next business year. If you have not invoiced for services, it does not yet count as income, but once you have a check, whether or not it is cashed, it does.
Fund a Retirement Account
You need to be thinking towards retirement, and this means that you need to establish your savings, and the business savings, as separate entities in most instances. If you have a 401K, it’s possible to have separate deductions for the money that you put into it. As Franchise Gator points out, you can even use a 401(k) to further fund your business in some cases.
Get a Specialist
If you’re a freelancer, you already know the benefit of outsourcing bits of your company to those who specialize in what precisely you do need. This includes tax preparation in many instances. If you have a fledgling business, you need someone who can help track all of the things that could be deductions during the year.
Your business and freelance work deserves you to have the things you need to be able to continue it. Whether that means good equipment, or the best experts to help you file taxes, you need to find all the deductions you can for your work. Don’t be lax in tracking your finances for tax needs. But, it’s easier to be prepared when you know you’re saving! Make those preparations, and be ready for the next time you need to file!
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