What Counts As A Deductible?

By Norbert Higensen


With the world moving towards a more and more hands off approach to work, meaning that more work is being outsourced and completed thanks to the global network known as the internet, there are likewise an increasing number of individuals who are working as freelancers.

Freelancer jobs in America have grown exponentially in the past decade as more and more individuals are opting to perform their work or offer their services to different companies from the comfort of their own home or office.

Deduction vs. Credit - First, it is important to understand that there are 2 primary ways to reduce the amount of taxes you pay. Deductions and credits both take money off the amount of taxable income but they are slightly different in how they affect how much money you save.

Deductions are run on a percentage basis that varies depending on the amount of income you make. Meaning that if you claim $4000 on a deduction and fall in the 25% bracket, you get a deduction of $1000. Credits, on the other hand, are good for 100% of their value. If your credit is $1000, you get the full $1000 taken off the total taxes you owe.

Freelance workers, no matter what the duties are that they perform, are considered independent contractors under the tax codes of the United States, and therefore must fill out and comply to the tax regulations attached to the tax form labeled 1099. A 1099 tax form is the freelancer's version of a W2 and will help to classify their taxes accordingly.

The first tip that freelancers who are trying to report and keep track of their taxes need to know is that there are different forms of 1099s that are used to report various types of income from freelance work and knowing which form to fill out and report with will be the first step in successfully completing your tax filings.

Tuition - There are several deductions and credits related to higher education. If you're a student, you want to make sure that you do not miss out on those. The amount that you are able to deduct depends on your income, so check with an accountant or tax professional to see what you qualify for.

One of the main benefits of being an independent contractor, or freelance worker, is that you can deduct many things from your taxes as business related expenses. One of the major deductions that freelance workers can deduct from their taxes is their own health insurance costs as well as the health insurance costs of your spouse and your dependents.

There are several more deductions that you can claim depending on your situation. The best way to reduce your taxes and get a better return is to take the time to learn which deductions and credits you qualify for and take advantage of each one.




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