Freelancing as a designer is one of the lucrative gigs currently, especially if you are good at your craft. This is because designing for a firm is more like a redundant position, except it is a firm that designs as a business.
Working in the production industry as a designer, for example, will only require that you work once in a while when the marketing team needs your designs. If you are exceptional at what you do, freelancing with such skill is the best as you get to work for a lot of firms from the comfort of your home.
If you create eye-catching logos or own thriving design business, what rarely catches your attention is how to file your taxes. This is because, as a thriving independent contractor, you focus on how to grow your business and not taxes, forgetting that taxes have a lot to do with the survival of your business.
As a freelance designer, you can claim some business expenses as legal deductions if they matter to your business success. This will lower your income and make you pay less annual freelance designer taxes. The form to use for such deduction is Form 1040, Schedule C, as it concerns the profit and loss that your growing business records.
According to the IRS- Internal Revenue Service, your activity is a business if it generates income. You must also be involved in the business with 'regularity and continuity.' Something you do as a hobby and do not generate revenue or profit is not considered a business. Justifying that your business expense is 'necessary and ordinary' makes it possible to be added to the deductibles. An expense 'common and accepted' in your business or trade is called an ordinary expense.
An expense is considered necessary if it is appropriate and helpful for your business or trade. When claiming expenses when you file for your freelance designer taxes, make sure they are related to your design business directly and not some third party business.
The following are some of the IRS expense deductions that freelance designers can deduct from their freelance designer taxes when filing a return:
Tax deductions common to freelance designers:
Working from your home rather than a commercial studio will help you get some home-related expenses off your return. Direct costs like expenses for using your home can be reported on Form 8829. The most crucial part of filing your tax return as a freelance designer is keeping clean records that are complete for all your expenses and incomes. This will save you a lot of stress when you have to pay your freelance designer taxes. If you are good at record-keeping, you will complete your annual income returns much faster and easier, though you have to be meticulous about it or use tax software that will help you keep your records organized.
A simple spreadsheet can help you get it all together, make sure that all your dates of expenses, purchases, business use, and time spent in completing a job is well documented. Keeping a log of your invoices and receipts is also essential. All these will help you especially when IRS has questions about your expense deductions.