Americans Go Solo
Upwork (UPWK), one of the largest freelancing platforms, recently conducted a survey of 3,000 working professionals and the results are in: freelancing is more popular than it has ever been.
39% of the workforce picked up freelancing in 2022 — 3% more than in 2021. This trend was most popular among younger Millennials and Gen Z. But it’s significant for workers, employers, and the market at large because it’s left employers struggling to fill positions, creating one of the tightest labor markets in decades.
The Great Work Revolution
It’s safe to say that this freelancing revolution gained steam during the pandemic. Over the past two years, workers across industries were forced to work from home for months. In doing so, many took to the flexibility of working from home — or, in some cases, for themselves — finding it preferable to the limitations of traditional work environments and daily commutes. So it’s not entirely surprising that, even after restrictions were lifted, the trend continued.
Upwork notes that this freelancing revolution is happening alongside other major work-related trends, such as “The Great Resignation” and “Quiet Quitting.” Through these trends, people are showing an emerging preference for leaving their bosses behind and taking their chances going solo.
More Than the Money
The decision to freelance isn’t always about financial gain. Of those surveyed, around 70% also noted pursuing meaningful work, the ability to work from anywhere, being your own boss, taking control of your financial future, and scheduling flexibility as reasons for making the change.
Nevertheless, although pursuing more freedom in your working life can often mean taking a cut in pay, it seems most people switched to freelance work to increase their incomes. Over 80% reportedly did so to earn extra money.
If extra money — or any other reason — is enough to convince you, platforms like Upwork or Fiverr (FVRR) are an easy place to get started freelancing. Just pick a subject that you’re knowledgeable in, create a profile, and put your name out there. You might be surprised at how easy it is to get paid to do what you’re good at doing.
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This article originally appeared on SoFi.com and was syndicated by MediaFeed.org.
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10 tax deductions every freelancer needs to know
While there might be a few reasons to envy the self-employed lifestyle, the increased tax preparation burden isn’t one of them. Not only must some freelancers file quarterly tax payments or risk IRS penalties and fees, but they are also required to pay the portion of Medicare and Social Security typically covered by an employer.
In light of this greater financial burden, self-employed people need to take advantage of all possible tax deductions to stay profitable.
While tax rules for freelancers can be complex, self-employed persons can generally write off expenses that fall into three categories:
- Things you use exclusively in operating your business
- Things you eat in the course of doing business
- Things related to the exclusive business use of the place where your business operates
Here are 10 possible tax deductions that every freelancer should know about
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If you travel to visit clients or attend trade shows, you may be able to deduct these expenses. Business travel expenses can include transportation and accommodation costs, and the IRS allows a 50% deduction for business meal expenses. It’s important to note that you shouldn’t attempt to write off any expenses associated with sightseeing and leisure travel, which can trigger an audit.
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Many freelancers work out of their homes in the early days, especially when their businesses are first getting off the ground. As a result, the IRS allows self-employed persons to deduct the portion of their mortgage or rent going to a home office.
To qualify for this write-off, you must have a specific area in your home designated for working, and you must refrain from using it for other purposes. When claiming this deduction, you can calculate the deduction’s value using either the regular or simplified home office deduction option.
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While business owners with offices outside their homes can deduct 100% of their utilities, freelancers who work inside the home can still write off a portion of this cost. To determine how much of your utility costs are tax-deductible, calculate the percentage of your home occupied by the office.
Along with gas and electricity, freelancers can deduct the costs of heating, air conditioning, and phone service. Be aware, however, that you cannot deduct the cost of utilities if you claim the simplified home office deduction.
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As a freelancer, it’s important that you find ways to stand out from your competitors in the industry. To keep ahead of the pack, many freelancers attend classes and educational seminars.
Understanding that the cost of these expenses can add up, the IRS allows freelancers to deduct expenses related to professional development on their tax returns. Additionally, self-employed persons can write off dues for professional organizations and membership fees.
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In our increasingly connected society, self-employed persons have to engage in marketing and advertising if they hope to stay competitive. The IRS permits freelancers to write off the cost of flyers, web advertising, business cards and print ads among other marketing expenses.
Want to know how sales tax is impacting your bottom line? Check out our sales tax calculator.
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With a majority of consumers using the internet to research purchases, creating a mobile-friendly, responsive website is crucial for a freelancer’s success. Luckily, self-employed persons can deduct costs related to their business websites, including domain fees, design, building costs and maintenance.
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These days, most freelancers spend their days staring at computer screens. From sophisticated video editing programs to basic options like Microsoft Office and Adobe Acrobat, software can be expensive and hence makes a useful deduction for small business owners and freelancers.
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Do you regularly drive to meet clients or suppliers? If so, you should take advantage of the tax deductions available for costs related to vehicle mileage or normal vehicle wear and tear. You can choose between two types vehicle-related deductions: the standard mileage option or the actual expense option.
The standard mileage option allows you to make a deduction based on how many miles you’ve used for business purposes. The actual expense option allows you to figure out the cost of maintaining your car with respect to the actual cost of keeping it maintained for business use.
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It’s no secret that clients are sometimes late in paying their invoices, but some never pay at all. Fortunately, the IRS allows self-employed persons to deduct unpaid invoices as a loss for their businesses. Keeping a detailed list of unpaid invoices along with each invoice number will help you properly take the deduction.
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If your freelance business is successful, you may be thinking about incorporating in the near future. The IRS permits new businesses to deduct expenditures associated with incorporation including state fees and legal costs during the business’ first year of operation.
Filing taxes as a freelancer for the first time can be stressful. That stress can include not knowing what to do with your self-employed tax forms. However, by taking advantage of all possible deductions and understanding what’s expected of you, you can minimize your tax burden and give your business the chance it needs to grow. On top of that, software like QuickBooks Self-Employed can help calculate expenses for you and simplify the entire tax-filing process.
For more tax-time tips, check out our complete guide to taxes for the self-employed.
This article originally appeared on the Quickbooks Resource Center and was syndicated by MediaFeed.org.
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Featured Image Credit: Prostock-Studio/ istockphoto .
