How to Taxes And Your Freelance Design Business

It’s that time of year again when your thoughts turn to taxes. Or at least it should, if you’re a freelance web designer.

When you get right down to it, there’s nothing like being a freelancer. You get to make your own hours, report to work in nothing but a bathrobe (or less, we won’t judge), and there’s no worries about commuting or driving in blizzards.

That is, until tax time comes, and you see what a terrible, terrible price your freelance design business is about to extract from you. You’ve got all the tools to rock your web design business, now you just need a little financial savvy to make it work. Here are some things that you should know about when it comes to freelancing and taxes.

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The Advantages That Employers Provide Are Denied To You

When you are your own boss, it means that you are responsible for everything having to do with you and working. For instance, if you work for a company, they will deduct taxes for you (Federal and State, unless in the latter case you’re lucky to live in astate without an income tax), depending on how much withholding you declare. They take care of half of your Social Security tax (FICA).

Although having that money taken out of a paycheck each pay period is a pain, at least when a non-freelancer files their taxes, they usually end up owing little to nothing, or even getting a refund. If you’re a freelancer, you not only have to keep in mind that you’ll owe the same Federal and State taxes, but you also need to pay the ENTIRE amount of FICA, since you are both employer and employee!

As a result, you should either make quarterly payments to the IRS, or, if you want that money to make interest and your tax bill will be small (remember, there are penalties for owing too much!), sock that money away in a savings account for the year. The IRS has a new tax guide to help taxpayers take advantage of numerous tax-saving opportunities. It’s a great read if you ever have trouble sleeping at night!

Fortunately, It Costs To Run A Business

Since you are the owner and operator of the freelance business, you not only have to pay taxes, you also have to shoulder the expenses, again another thing that a regular salaried employee doesn’t have to worry about. But in this case, you can deduct business expenses from your design business. Healthcare costs, travel expenses (provided you keep track of mileage, tolls, gas, and other incidentals related to travel), and operational costs. The operational costs category is a veritable windfall of eligible things, like tools, equipment needed to do your job, fees for certifications and licenses (this includes renewals), trade-related periodicals, and the all-important communications expenses (phone, Internet).

Organization is a crucialfactor in ensuring proper tax remittance. According to this post, Financial Management for Freelancers, keeping separate accounts for personal and business activities “helps avoid overspending and the highs and lows of erratic earnings.” So it definitely pays to be neat and organized.

The Office

No, not the defunct television series, although if you want to buy yourself your own “World’s Greatest Boss” mug, you’re free to. Your home office could be what makes the difference between getting totally hosed by self-employment taxes and walking away with some profit to show for it and a manageable tax bill.

Is there a part of your house that you use regularly to conduct your freelance design business? Is the area set aside just for doing your work? If so, you can deduct a whole list of expenses for home business use. This includes things like utilities (heat, electricity), repairs and even a portion of your mortgage interest. After all, as the employer, you need to provide a workspace for your business, right?

The “World’s Greatest Boss” mug is probably not deductible, by the way.


This post is meant to inform and entertain. I am neither a tax professional, nor do I play one on television. For tax advice and exact legal obligations, consult a qualified tax professional!

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