Freelancing offers freedom—flexible hours, no boss, and the chance to work on what you love. But with that freedom comes responsibility, especially when it comes to taxes. Unlike traditional employees, freelancers don’t have taxes withheld automatically. That means you’re on your own to calculate, set aside, and pay them. Done right, you’ll avoid penalties and even keep more of your money.
1. Understand Self-Employment Tax
Freelancers pay both the employer and employee portions of Social Security and Medicare taxes—collectively known as the self-employment tax. For 2024, this is 15.3% on net earnings. It can feel high, but remember—it also funds your future Social Security benefits.
2. Track Every Expense
As a freelancer, many of your business expenses are deductible, reducing your taxable income. Common deductions include:
- Internet and phone bills
- Office supplies and software
- Travel and meals (for business)
- Health insurance premiums
Good record-keeping is key. Use apps like QuickBooks Self-Employed or Wave to track everything.
3. Quarterly Estimated Taxes
The IRS requires freelancers to pay estimated taxes four times a year (April, June, September, and January). Missing these can result in penalties. A good rule of thumb: set aside 25–30% of your income for taxes.
4. Retirement Savings
Traditional employees have 401(k)s, but freelancers can set up SEP IRAs or Solo 401(k)s. These not only reduce taxable income but also build long-term wealth.
5. Hire a Professional
Taxes for freelancers can get tricky, especially as income grows. A CPA or tax advisor can help maximize deductions and ensure compliance.
Final Thoughts
Being a freelancer means wearing many hats—including tax preparer. But with planning and discipline, you can avoid stress and keep more of what you earn. Taxes don’t have to be a headache; think of them as part of running a successful freelance business.
