6 Surprising Tax Deductions You Might Qualify For as a Freelancer

published Mar 22, 2021
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‘Tis the season for filing taxes, and for freelancers, the process can be especially daunting. “When you are self-employed, you are considered both the employer and the employee,” Aaron Smyle, president and founder of New York City-based tax accounting firm Smyle & Associates tells Apartment Therapy. “Therefore,  freelancers are responsible for paying the total amount of payroll taxes (i.e. Social Security and Medicare), as opposed to only half.”

Since self-employed people are essentially treated as individual businesses, Mikkel Jensen, U.S. Managing Director at Ageras, says freelancers can write off certain work-related expenses as itemized tax deductions when they file their returns. “Understanding what deductions you qualify for is key to saving money on your tax bill,” he explains. “As a freelancer, you can claim deductions on expenses that are ‘ordinary and necessary’ to your work, which to the IRS means things like office supplies, computers, and even travel expenses.”

Interested in learning more about what kinds of tax deductions you might qualify for as a freelancer? From work-related education classes to marketing materials and more, here are some surprising business expenses accountants and financial experts say self-employed people can report when filing their yearly taxes — as long as they have the receipts to prove it.  

Work-Related Educational Expenses

Self-employed individuals who take educational classes or invest in research related to their work can claim these expenses as tax deductions. “Educational courses and materials that are necessary to improve work may be deductible,” says Joan Crain, Senior Director and Global Wealth Strategist at BNY Mellon Wealth Management. “This includes subscriptions to professional and trade publications.”

However, Tina Orem, a tax specialist at NerdWallet, says that the education has to meet certain requirements in order to be deductible. “You may be out of luck if the schooling is necessary to meet minimum education requirements of your present trade or business, or if it’s part of a program that qualifies you to work in a new trade or business,” she explains. “IRS Publication 970 has all the details.”

Office Equipment and Supplies

Section 179 of the Internal Revenue Code says some big-ticket pieces of office equipment, such as laptops, monitors, software, desks, and chairs can qualify for a tax deduction if they’re assets to your business. “For tax deduction purposes, office equipment includes items that are bought for long-term use, and thus, depreciate over time,” Jensen explains.

Freelancers can also deduct certain office supplies, including writing pens, postage stamps, printer ink, and paper clips, from their taxes, as long as they’re used for business-only purposes. “Office supplies also must be used within a year of purchase to qualify, as they are considered a short-term asset,” Jensen says. 

Contributions to a Retirement Fund

Often overlooked but highly impactful on a tax return, Crain says contributions to certain retirement accounts are one of the biggest deductions that freelancers can claim. “Solo 401(k)s or Simplified Employee Pension (SEP) IRAs can be funded at any time during the tax year (or in the case of a SEP IRA, even after the end of the year as long as it’s done before the tax filing deadline), and the funding limits are generous,” she explains. 

If you’re a self-employed individual who earns a high income, Crain says contributing to a Defined Benefit (DB) pension plan — a traditional pension plan with a stated annual benefit you will receive at retirement — is a major tax deduction that can also help you build up your retirement fund. “This is a smart move for people who want to sock away even more money,” she explains. 

Advertising and Marketing Expenses

Whether you’re a dog walker with cute business cards or a freelance makeup artist who pays for Facebook ads, Jensen says any promotional materials used to attract new clients are considered business expenses. “Advertising and marketing expenses are 100 percent deductible,” he says.

For freelancers, Jensen says this means getting funds back for the money you’ve spent on building a website. “This deduction includes expenses such as website design costs, including hiring a designer or buying a pre-paid template; hosting your website; website add-ons and plugins; plus maintenance of the site,” he explains.

Credit: Elissa Crowe

Business-Specific Phone Use

If you use your mobile phone regularly for your job, Orem says the IRS will allow you to claim a portion of the bill as a business expense. “In general, the proportion of the bill associated with your business use may be deductible,” she explains. Translation: If 40 percent of the time you spend on your phone is business-related, then you can deduct 40 percent of your phone bill.

However, Orem says the same deduction doesn’t necessarily apply to landlines. “For landlines, the cost of the first phone line in your house typically isn’t deductible, but a second landline generally is deductible if it’s used just for your business,” she explains. 

Professional Help

If you’re self-employed, certain professional services, including fees paid to accountants and legal consultants, can be claimed as business expenses on your tax return. “Seeking tax and legal advice — including help with preparing your tax return — is typically well worth the cost for freelancers, and the fees are deductible,” Crain says. 

Not only will hiring an accountant to help you file your taxes qualify as a deduction, Jensen says it can save you loads of money on your tax bill. “You can have peace of mind that you’ll avoid audits and of course, save the most money,” if your tax accountant is up to date on the latest rules and regulations, he says.