Freelancer Taxes: Tax Tips for Freelancers Filing for the First Time

If you’re a first-time freelancer, it may be a bit nerve-wracking to think of handling your own taxes as a newly self-employed filer. But with a little organization and forethought, managing your taxes is actually quite doable! And TurboTax is here to help.

Even if you’re freelancing as a side gig while maintaining a traditional full-time job, tax laws for self-employed apply to you. So, if you’re new to freelancing, here are some tax tips you’ll want to know.

Are freelancers required to file taxes?

Yes, the IRS considers freelancers to be “self-employed,” even if they are also holding full-time employment. Therefore, freelancers are responsible for reporting their self-employed income and paying self-employment taxes. 

7 Freelancer Tax Tips

Know which taxes you need to pay

When filing taxes as a freelancer, you’re expected to pay federal income taxes, as well as state and local income taxes if applicable. In addition, there is a self-employment tax, which covers your contributions to Social Security and Medicare programs.

Your income tax rate will depend on your income and filing status. Tax brackets for 2023 and 2024 range from 10% to 37%. To find your income tax rate, use our tax bracket calculator.

Self-employment tax is:

• 12.4% for Social Security
• 2.9% Medicare taxes

Note that an additional Medicare tax of 0.9% applies if you earn over:

• $250,000 and are married, filing jointly
• $125,000 and are married, filing separately
• $200,000 for any other tax filing status

Use our self-employed tax calculator to estimate what you owe or your refund.

Consider filing quarterly estimated taxes

Quarterly taxes are a kind of “pay as you go” system that the IRS has set up to ensure you pay taxes as you earn your income. Estimated payments are usually made by freelancers or individuals with multiple side gigs and can help make budgeting your annual tax responsibility much easier.

At the beginning of each tax year, you might have a decent idea of what you can expect in terms of total income for the year from all income sources. That said, you should keep tabs on your incomesales each quarter to see if your expectations are lining up with reality. You might have a boom in sales that will impact your estimates.

Additionally, you might want to keep in mind deductions or credits that you’ll end up claiming and how that can impact what you think you’ll owe. These deductions can offset your income from freelance work and reduce your overall tax liabilty. Throughout the year, you’ll make four quarterly payments to the IRS and your state tax entity if there’s an income tax in your state.

Research deductions and credits

Do you know which deductions you can take as a freelancer? Software programs like TurboTax, can help you identify all the deductions you might qualify for. You may be eligible for some of the top tax deductions related to:

• Health insurance for self-employed
• Home office space and supplies
• Car or transportation expenses
• Continuing education programs
• Magazine or newspaper subscriptions

There are a lot of business deductions that you don’t want to miss out on to reduce your tax liability and save money for your business.

The home office deduction might be worth considering. The IRS has actually made it easier to calculate and take this deduction in recent years, so even if you’re a first-time freelancer working mostly from home, the process isn’t complicated. As long as you meet the IRS qualifications for taking the home office deduction, you can proceed and get savings for your work at home.

You’ll want to carefully consider which of the available deductions and credits are applicable as they relate to your particular freelance business, but here are some of the most common deductions and credits available:

Deductions:
– Business expenses: Office supplies and work-related devices; accounting, marketing, or legal fees; travel expenses and gas for business trips; etc.

– Health insurance: Freelancers who pay for their own health insurance may be able to deduct some or all of their yearly premiums.

– Self-Employment Tax deduction: 50% of your self-employment tax may be deducted as a business expense.

– Home office deduction: A portion of rent (or mortgage interest & property taxes), maintenance, utilities, etc. is deductible for the freelancer who uses a home office.

Try the self-employed tax deduction calculator to see which apply to you.

Credits:

– Earned Income Tax Credit (EITC): A tax break that helps low- to moderate-income workers and families.

– Clean Vehicle Tax Credit: Tax credit for purchasing a new or used electric vehicle.

Plan for retirement

As a freelancer, retirement planning requires careful consideration to ensure financial security for the future. When planning, remember that some plans, like a traditional IRA or 401(k), may offer tax deductions for your retirement contributions.

The earlier you start saving, the more time your investments can grow and work for you. Even small contributions, made consistently over time, may improve your post-retirement lifestyle and provide a buffer for inflation and unforeseen healthcare costs.

Keep accurate records

Keeping organized is essential to successfully handling your taxes as a freelancer for the first time and can help you ensure you’re taking advantage of any deductions and credits you’re entitled to.

Sure, tax time seems like a distant prospect, but April will be here before you know it. Receipts for business-related expenses, payments you received from clients, and other paperwork are needed to complete your taxes.

Make sure to keep everything organized so when tax time rolls around, you have it all compiled and ready when you sit down to do your taxes.

Note tax deadlines

Take note of these freelancer tax deadlines to ensure smooth filing and avoid penalties:

Deadline to file federal income tax returns: April 15 or the following business day if it falls on a weekend or holiday.

Quarterly Tax Payment Deadlines:

• April 15
• June 15
• September 15
• January 15 of the following tax year

Consider getting help to navigate the process

People who are filing taxes as first-time freelancers have a few key points to learn but don’t worry about knowing the tax laws. TurboTax will ask you simple questions about you and your business and give you the tax deductions and credits you deserve based on your answers.

No matter what moves you made last year, TurboTax will make them count on your taxes. Whether you want to do your taxes yourself or have a TurboTax expert file for you, we’ll make sure you get every dollar you deserve and your biggest possible refund – guaranteed.