This article was updated for Tax Year 2023, last edited on January 22nd, 2024.
Highlights
Freelancers may be considered independent contractors which means they can receive a 1099 rather than a W-2.
As an independent contractor, certain expenses can be deducted from your income such as costs for using your home as a business and business mileage.
Why are my taxes higher as a freelancer than as an employee?
As an employee, your employer withholds your federal and state taxes from your paycheck to pay to the appropriate revenue authorities. As a freelancer, you are now your own employer and responsible for paying those taxes.
In order to have a lower tax bill by the time tax season arrives, you can pay estimated tax payments.
What is my IRS business code as a freelancer?
This depends on exactly what you’re doing as a freelancer. You can look up your NAICS code based on what you do for work as a freelancer.
I do a bunch of different freelance jobs for income. How do I report this?
If your income is made up of several different freelance jobs, you’ll need to report the income and expenses for each activity separately depending on the activity.
For example: if you drive for two different rideshare companies, both of these jobs can be reported under the NAICS code for transportation or taxi independent contractor.
In another example: if you drive for a rideshare company but also do some website design work, the income and expenses from these activities will need to be reported under different activities.
I’m a freelancer, what can I deduct?
The IRS’s most basic guideline is that to be deductible, the business expense must be ordinary and necessary.
Ordinary means that it’s common for other freelancers or those in your industry to deduct these items.
Necessary means that it’s needed for the success of your business
What are some examples of what I can deduct?
If it is directly related to the work you do, you can deduct it as an expense. Work-related expenses reduce your taxes by lowering the amount of self-employment income you get taxed on.
Here are some examples of business expenses for the self-employed:
See Publication 535 for more information.
Additional Resources:
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