20 Tax Deductions for Web Designer in 2021
Freelancers enjoy freedom and flexibility. However, it doesn't mean they are not prone to anxiety. Although you have the freedom to work from home and set your own schedules, freelancing is not easy. Freelancers still have deadlines to meet, clients to network with, and getting paid on time.
There is one more thing that can be stressful if not managed properly, i.e., taxes. Freelancers are in charge of filing their taxes and as a self-employed individual, you may be able to benefit from freelance designer tax deductions and write off some expenses.
This article by TFX deals extensively with the topics of freelance design taxes and web designer tax deductions that you need to be familiar with.
20 web designer tax deductions you need to keep in mind
1. Home Office
Tax deductions can be claimed if you use your home office to conduct your business. Two conditions must be met in order for this deduction to be valid.
- Your home office should be the primary place where you do your work
- It must only be used for business purposes.
2. Internet Charges
The cost of your home internet service covers both your work and non-work hours. What percentage of your time are you spending online for work? You'll need to do the math to find this out. Finally, write off the amount you pay each year for your Internet service.
3. Utilities
If you're going to run a business from your own house, you're going to require power, gas, and/or heat to function properly.
4. External Spaces for Business
If you do not work from home, you can deduct the cost of your external workspace. This includes the following:
- Rent for offices, including all utilities and Wi-Fi
- Additional expenditures (e.g., coffee shop purchases, hotel or restaurant fees)
5. Equipment for Work
Business equipment is typically purchased with the intention of using it for a long time. Included in this are:
- Furniture like desks and chairs
- Devices such as printers and scanners
- Electronic devices, including laptops, cellphones, and computers
6. Supplies for Office
Expenses for office supplies can be deductible if they are used for a short period of time. This includes products like printer paper and notebooks.
7. Website Costs
When it comes to running a business, your website is essential. This becomes more important when most people are stuck at home and spend a lot of time on their computers.
As a result, any money you spend on maintaining your website should be deductible. The following are included in this list:
- Costs for website hosting
- Domain name registration and renewal services
- Power-ups like CDNs, SSL certificates, and more
- Plugins
You can add the costs of website maintenance even if you hire someone to do it for you.
8. Digital Marketing
Marketing and advertising charges can be deducted if you're spending money on them. These include:
- Ads on social media platforms
- Search Engine Marketing costs
9. Software and Applications
You can deduct the cost of any software or program you use to create websites or run your business. As a web developer or designer, this is likely to be one of your most important categories.
10. Fees for Payment Processing
You'll be charged a 2.9 percent fee on every transaction with most payment processors. Moreover, wire transfer fees are incurred when customers pay you directly through your bank account. You need to keep note of these costs so that you can deduct them as a company expense!
11. Assistance from a Professional
If you have hired someone for professional assistance (think contractors, employees, lawyers, or accountants), you can write off the costs.
12. Networking and Professional Development
If you have taken courses to develop your skills or spent money on attending local meet-ups, you can deduct the costs.
13. Travel Expenses
If you have traveled for work, you can write off some of the costs. These include:
- Gas costs
- Parking
- Lodging
- Meals
14. Health Insurance
Insurance premiums paid through the marketplace can be written off, unlike health insurance paid for by an employer.
15. Professional Insurance
Keeping you and your business secure may necessitate additional types of insurance coverage. These can be written off as well.
16. Professional Licenses
If you pay for a business license in your state or form an LLC, you can write these expenses off.
17. Contributions to a Retirement Plan
Up to 60% of your income can be deducted if you contribute to an Individual Retirement Account (IRA).
18. Donations
You can deduct charitable contributions you make to groups like churches, nonprofit foundations, veterans' organizations, and so forth.
19. Self-Employment Tax
Freelancers must pay self-employment taxes. Your tax preparation program should handle this for you. Half of this is deductible.
20. Unpaid Invoices
It all comes down to how you go about issuing and handling invoices. You can claim unpaid invoices if you utilize accrual accounting. For cash-based accounting, it is not possible.
To sum up
Tax season can be stressful. Being organized and prepared ahead of time can make this time of year much easier. You may be able to lower your taxable income if you are familiar with the deductions and freelance tax write-offs.