Common Tax Deductions for Freelancers

by PT on March 11, 2010

If you are a freelancer with your own business there are numerous tax deductions that you will want to be aware of. Why? Well, a tax deduction reduces the amount of taxable income you’ll have when you file your taxes. Here is a look at some of the most common tax deductions for freelancers:

Home Office Space Deduction

If you work from home you are entitled to write off your dedicated work space. You can write off a percentage of your mortgage or rent in relation to the size of the space that you use to conduct your business. A portion of your homeowners or renters insurance is also a deduction.

Percentage of Bills

If you are using your home to conduct your business, a percentage of your utilities, phone and internet can be deducted. If you have a dedicated fax and phone line for your business, that is also a business write off.

Technology Expenses

Most everyone who runs their own business today uses some type of technology to do so. You can write off any technology purchases you make and use to conduct your business including computer equipment, computer upgrades, fax machines, internet routers, printers, web cameras, zip drives and the list goes on. Any computer software you use for your business is also deductible.

Office Supplies

This includes purchase you made on everything from your desk, filing cabinets, desk chairs to paper, pens, paper clips or any other supplies you use to conduct your business. Envelopes and the cost of postage are also tax deductions.

Business Related Expenses

This includes everything from business cards and letter head to copyright and incorporation fees.

Education, Training and Subscriptions Fees

This can be a large array of items including seminar fees, workshop fees or any other type of educational course fee related to your business. Educational magazine subscriptions, other subscription fees for anything related to your business, professional affiliation or association fees are all considered tax deductible.

On-Line Fees

If you have a website, you can deduct the cost of your domain name(s) and web hosting fees.

Travel Expenses

Any time you travel for your business there are numerous tax deductions. These include transportation expenses like parking fees, mileage, airfare, taxis, buses and trains. Other travel deductions include hotel rooms, office space rental, meals on the road and even your cleaning or laundry expenses while traveling. Some of your travel expenses will be 100% deductible while others will only be 50% deductible – consult with a tax professional if you are unsure.

Everything Else

Other expenses you can write off include your health insurance (if you are paying for it through your business), annual credit card fees paid to a credit card used for business purposes, unpaid client invoices and fees from collecting money like Paypal or bank fees. If you rent a post office box or safe deposit box for your business those fees are also deductible. Tax software and tax preparation fees are deductible as well. Finally, client related expenses like the cost of a business lunch or gifts given to clients are also tax deductible.

As you can see, if you own your own business there are numerous tax deductions you need to be aware of. In order for you not to miss anything it will be important to carefully keep track of all of your expenditures throughout the year. Always make sure to document and keep receipts for all of your expenses. A great tool to do this with is Quicken.

This article is provided for Backtaxeshelp.com, a site designed to help you with IRS back taxes. Owing back taxes to the IRS is stressful, and negligence will only worsen the situation. Learn how to pay back taxes.

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This week (or two) of budgeting reviews continues as I take a look at Mvelopes. Mvelopes is an automated, access-from-anywhere, budgeting tool based on the envelope system of budgeting. It also comes with bill pay.

Upfront, it’s important to tell you that Mvelopes is a subscription based system. So, along with all the nice features, you have to pay a monthly fee. Albeit a very low fee. But Mvelopes is a solid budgeting tool and has been recognized as such: PC World gave them a World Class Award – one of The 100 Best Products of the Year. Here’s how Mvelopes describes themselves:

“Mvelopes is the most effective online personal finance and spending management system ever. Mvelopes Personal is an online budgeting system that makes it easy to create an effective personal budget and track every aspect of your spending as it happens. It will help you always know exactly how much you have left to spend, instantly know the impact of every spending decision, effectively manage credit card spending, and quickly create an easy to use household budgeting plan.”

What You’ll Get with Mvelopes

Financial Account Aggregation – See all your accounts in one place and visualize your financial situation at a glance. This helps you track your net worth effectively.

Traditional Envelope System – Mvelopes, as the name suggests, is built on the idea that at the beginning of the month you put your income into different spending folders (or envelopes). Then you spend the rest of the month using the money from the envelopes. This helps you to spend every dollar before you earn it. That way you can make sure you spend it on things like savings, debt reduction, and giving. Mvelopes sets this up automatically for you each month once you’ve done the initial setup. You can quickly transfer money between envelope (drag and drop), and you can even take into account credit card usage.

Online Based – No download needed. It’s online-based software. You log in to your account from any PC or Mac or mobile device. This is the big advantage Mvelopes has compared with You Need a Budget 3.

Bill Pay – Another big selling point for Mvelopes is the bill pay feature. I’m not aware of any other budgeting software that lets you do this. Pretty handy.

Community – Mvelopes has a very robust community of users who all interact via the community groups and forums. You can also get training, live support, articles, and even premium life coaching services. You can also make some referral money through Mvelopes. They have a refer a friend program where you can earn $15, and your friend saves 20%.

Free E-Book Download

The folks at Mvelopes created a free E-Book to get you motivated and help you start using the Mvelope system. It’s called Money 4 Life. That link is a direct download. Right click and “save as” to put it on your computer and read it at your convenience.

First Steps with Mvelopes

Mvelopes -  Online Award Winning Envelope BudgetingI tested out Mvelopes using their free trial and I walked through the first steps. Be aware that you will need to sign up with a credit card for the free trial. You just need to set yourself a reminder to cancel in the event you’re not happy.

When you first sign up and get into the system, you’ll need to add accounts your financial accounts (link bank and credit accounts using online credentials), automate your bill payments, set a spending plan, fund your various envelopes, and finally, set up mobile phone access.

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So there you have it. Mvelopes looks like it has some great benefits to offer for those people who want an online system to help them manage their spending and create a better financial future. If you’ve used Mvelopes extensively I’d love to hear your thoughts in the comments below.

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Easy Money: Good and Not So Great Ways to Get Money Fast

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Sorry to disappoint you 80’s comedy fans, but I’m not talking about the Rodney Dangerfield flick from 1983, Easy Money. I’m referring to you and your finances. How can you get cash quick if you needed it badly? Let’s say some unfortunate event happened and you needed a large sum of cash immediately (within a [...]

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Unautomate Your Finances: A Simple Passionate Approach to Money

March 9, 2010

A new financial guidebook just became available that I really like. It’s called Unautomate Your Finances: A Simple, Passionate Approach to Money. It was created by Baker from Man vs Debt. I was able to get an advanced copy of the guide and thought I’d share a bit of my thoughts on the book. First, [...]

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Free Office Space Anywhere in the World

March 7, 2010

Free Office Space for the World Traveler
I just received a great tip from Karol over at Ridiculously Extraordinary. In his newly released online e-book, How to Live Anywhere he shares, amongst many other tips, how you can get free access to airline lounges and free access to office space at over 1,000 Regus business lounge [...]

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