How does contract or freelance work affect my taxes?
Doing contract or freelance work often means that you’re self-employed. If you received a 1099-NEC for your work, you’ll have to file your taxes as a business owner—even if you don’t technically own a business. There are a few things to know about being self-employed when it comes to doing your taxes. You might have to pay additional taxes, but you can take deductions for a variety of things to help offset that.
1. Your self-employment income is subject to self-employment tax
When you're an employee, you and your employer both pay Social Security and Medicare tax with each paycheck. But when you're self-employed, or have self-employed income, you have to pay that tax by yourself. It’s a total of 15.3%—12.4% for Social Security and 2.9% for Medicare. Just enter all of your income forms, and we’ll calculate the tax for you. To make things easier, you can snap a pic and upload multiple 1099-NECs in TurboTax.
2. You can reduce your taxable self-employed income by listing your business expenses
Since you’re self-employed, you can write off your expenses, which can reduce your taxable income. Things like your the business portion of your mobile phone and internet bills, advertising costs, equipment rentals, and maintenance and repairs all count as long as they are for your business or self-employed work. If you tell us about the type of freelance work you do, we’ll customize your list to the most relevant expenses for your field.
3. You can take certain business deductions
On top of listing your expenses, you can also take deductions for your self-employed or freelance work. For example, if you work out of your home, you can take the home office deduction. There are some qualifications, but we’ll ask you about your space and determine if you meet them to take the deduction.
