Freelancing is one of the fastest-growing jobs in the world. A lot of people are now into freelancing because it’s in high demand, plus it’s a cool way to money while working at your own pace. Working as a freelancer is more manageable because one can determine the number of hours to work and at what rate.
Recent studies have shown that there are over 53 million freelancers in the United States alone and more than 80% of United States workers are ready to work extra hours to earn more money. However, when we talk about income, it is also essential to consider the issue of tax because that is what makes up revenue for the state government. A tax is a compulsory contribution levied on every income earner, including freelancers. You should learn about freelance tax California guidelines to pay your self-employment tax.
Have you found a golden opportunity to work with one of your clients with yearly income above $400? If yes, you need to think about tracking income and setting aside your tax. You need to engage the service of a tax consultant for advice on how to file your taxes.
There are a lot of legal tax deductions for freelancers and consultants in California that you need to know. Knowing the various tax deductions will help you save money and time in every tax season. If you are still in doubt of the deductions to make, below are tax deduction you should know about before computing your freelance tax California.
Here are 7 tax deductions available to freelancers in California:
Since a freelancer serves as an employer and employee at the same time, he does not have anyone with whom to split the cost of medicare and social security taxes. That means he has to pay a higher amount for medicare and social security taxes.
However, the Internal Revenue Service (IRS) allows freelancers and sole proprietors to deduct the amount their employer would have contributed if they were to be working under one. Because of that, the new self-employment tax rate for freelancers and sole proprietors is around 7.5%, which is approximately half of 15.3%.
When we said freelancers are self-employed individuals and that they are solely responsible for their freelance tax California; we mean they have to provide for their health insurance. Freelancers can deduct their health insurance premiums, but the amount must be in tune with the stand estimates.
Do you have a designated space in your home that is exclusively used for your freelance business? If you do, you can claim home office expenses on your tax return. However, before you can claim home office expenses, you need to be sure that the item in question involves a portion of your home that is strictly used for your freelance business. IRS permits a $5 claim per square feet deduction up to 30 square feet.
Do you buy stationery such as envelopes and writing materials to run your business? It would interest you to know that there is a deduction for supplies. Printer ink and stamps are part of this list. You can claim deductions for all office supplies, but remember to document all the receipts to serve as evidence when filing your freelance tax California.
As a freelancer, your business may require you to attend a meeting with clients in other countries. You can claim business travel expenses on every trip you make. However, you must make sure that all the trips are business-related. Your airline tickets and booking confirmation slip should be in safe custody for reference purposes.
Self-development and certification courses directly related to your work should not be relegated if you must progress in freelancing. They are necessary to promote your business or enhance your skills. To claim this deduction, you need to keep records of your tuition and any other expenses that you incur throughout your program.
As a freelancer, you may rely on the use of phones and the internet to conduct your business. Internet and phone bills are expenses directly related to many freelancing enterprises, especially for those working as a consultant from home.
Other notable expenses that can be deducted from your taxes are the cost of advertising and money spent on promotions, mileage, business meals, and retirement savings plans.