3 Tax-deductible Expenses That Freelance Writers Ignore

Being a self-employed writer has many advantages; not only are you your own boss, but you also have a lot of say in what you pay as taxes. Unfortunately, many freelancers do not understand how they can save on their income tax budget by paying the right amount of taxes as required by law.

Here are 3 expenses that many freelance writers often overlook when it comes to filing their tax returns:

Paypal Fees

Paypal and other online payment services such as Alertpay and Moneybrokers offer great opportunities for freelancers to send and receive money online. These organizations will charge you some fee for the services that they will offer you. Luckily, IRS allows you to deduct these fees from the income that you receive. In many cases, these amounts are quite low since many freelancer writers do not earn that much. However, once your income goes up, you'll realize that the amounts are quite substantial and you can save a lot if you treat them as tax-deductible expenses.

Cost of Research

For you to perfect your trade, you have to rely on other people to help you gain information. This might include belonging to a coaching club, buying informative books and videos, subscribing to trade journals, and attending conferences. All these things are meant to help you become a better freelance writer. The costs that you will incur here can be deducted from your income before you arrive at your net profit.

Home Office Expenses

Many freelancers operating from their homes are unaware of the fact that they are able to deduct related expenditure from their profits. On the other hand, majority of those who know about this may not understand the complexities associated with it.
Home office expenses are not tax-deductible in the same fashion as commission fees and other direct costs. You can only reduce your taxable income by deducting them from your profits. This means that you cannot use the business proportion of your residence expenditures to create or increase losses. However, you can use them to reduce your profits to zero.

Another tricky part of handling this expenditure is determining the amount. Since many of the expenses of the house are divided between personal and business expenditure, there needs to be a way of allocating these costs. To arrive at the proportion of costs arising from your business activities, measure the size of your home in square feet and then measure the size of your home office. The total amount of income that you will subtract from your net profits shall be equal to: (size of home office/size of house)*total costs.

The job of filing your returns can be hectic especially if you do not have a financial planner or a tax consultant. If you choose to do it yourself, completely separate the money that you get from freelance writing from any other income that you are receiving.