The first year I filed taxes, I was so excited I could finally claim church donations on my taxes. Except, it wasn’t really worth it to claim the donation because my itemized deductions were less than my standard deduction. Yep, even though you qualify for a certain tax break, it’s not always beneficial to take it.
Deductions allow you to lower your taxable income and indirectly lower your income tax liability. Many taxpayers aim to take as many deductions as possible so they pay less money in taxes.
Here are four different types of tax deductions you should be aware of as a freelance writer.
Standard Tax Deduction
The standard deduction is a fixed amount that everyone can deduction from their income with a few exceptions. The amount of the standard deduction is based on tax filing status.
For example, in 2024, the standard deduction for a single tax filer was $14,600. For married tax filers filing jointly, the standard deduction was $29,200. The standard deduction reduces your taxable income and therefore decreases the amount of tax you owe.
You might take the standard deduction if you don’t want to itemize, can’t itemize, or if your itemized deductions are lower than the standard deduction. Some people can’t take the standard deduction. For example, if you and your spouse file separately and your spouse itemizes, you must also itemize. Nonresidents and resident aliens also have separate rules for taking the standard deduction.
Itemized Tax Deductions
The IRS has a long list of tax breaks you might qualify for. For example, you may be able to deduct certain medical or dental expenses if they were more than a certain percentage of your adjusted gross income. If you paid a large medical bill last year, you may be able to get a tax benefit from it.
Homeowners may also be able to deduct a certain amount of the interest they pay on a mortgage.
Donations made to a charity can also be deductible.
You may not be able to claim certain tax deductions if your income exceeds a certain amount. Or the total of the deductions may have to exceed a certain minimum before you can take the deduction.
If the total of your itemized deductions is less than the standard deduction, it’s better to take the standard deduction if you qualify. Basically, you want to compare your potential itemized deductions with the given year's standard tax deduction that you're eligible for, then choose the option that lowers your tax bill the most.
Above-the-Line Tax Deductions
Above-the-line tax deductions are an adjustment to your total income, allowing you to lower your adjusted gross income for tax purposes.
These deductions are subtracted from your income before any other deductions are made.
The best thing about above-the-line tax deductions is that you can take them regardless of whether you itemize or take the standard deduction. If these above-the-line tax deductions were part of the list of itemized deductions, some taxpayers would never get the benefit of them.
There are some ceilings on above-the-line tax deductions. For example, you can deduct the amount of interest paid on a qualified student loan, but only a maximum of $2,500, and only if your modified adjusted gross income is $80,000 or less (as of 2024).
Business / Schedule C Tax Deductions
Schedule C deductions really fall under above-the-line tax deductions, but it’s such a big part of a freelance writer’s taxes that it deserves it’s own category.
If you spend money on your business, Schedule C is where you’ll adjust your income based on your business expenses. If you buy it for your business, there’s probably a way to deduct it on your taxes.
I typically deduct home office expenses, office supplies, PayPal fees, miles driven for research, internet cost, software expenses (e.g. Microsoft Word), cost of books (like the AP Stylebook), web hosting fees, and domain fees.
Other business expenses you might incur as a freelance writer include:
- Tax preparation services
- Legal services (such as contract reviews)
- Business bank account fees
- Marketing or advertising expenses
- Contract labor costs (such as hiring a virtual assistant)
- Education costs related to your business
- Qualified retirement contributions
Not only will these Schedule C expenses help you file your taxes, but it can help you plan your spending for the following year.
Make sure you're taking all tax deductions you're eligible for as a freelance writer. Keep organized financial records of any business expenses you plan to deduct from your taxable income, and think ahead at the start of each year to find the right balance between profits and investing in your business for growth while minimizing tax deductions the next time you file.
Note: This post was originally published on January 31, 2011 and has since been updated and re-published.
