Working from home is a dream come true for many people, offering a level of freedom you can’t get in an office. However, this arrangement can make taxes more complicated, especially if you’re self-employed. With this in mind, the guide below explores some of these differences so you can reduce your liability and avoid problems with the IRS later.
4 Ways Working From Home Affects Taxes
1. Paying Estimated Taxes
If you’re working for another company, your employer will still calculate and deduct taxes from your paycheck. Self-employed freelancers, on the other hand, must pay their own estimated taxes. Furthermore, this needs to be done every quarter instead of once a year.
2. Self-Employment Taxes
Freelance workers don’t have traditional employers who will pay their Social Security and Medicare costs for them. Instead, you’ll have to cover these taxes yourself, which can be a surprise for the newly self-employed.
3. The Home Office Deduction
Whether you’re self-employed or work from home for a company, you may be able to deduct expenses associated with your home office. To qualify, you must use the space exclusively for work, and can only deduct a portion of your rent and utility bills.
4. Office Supplies May Be Deductible
Workers who telecommute may be able to deduct what they spend on pens, pencils, printer ink, and paper, but only if you itemize your deductions. For self-employed contractors, these are considered business expenses, which are deductible even if you take the standard deduction.
If you work from home, Donna Sellers, CPA has the skills and understanding of the law to help you avoid potential issues and get every deduction you qualify for. She has been serving workers and business owners throughout the Brownfield, TX, area for over 20 years, offering a variety of services related to tax preparation and bookkeeping. Visit her website for more on these offerings, or call (806) 637-8556 to make an appointment today.