Tax Deductions for Internet Designers & Builders

This submit first appeared Feb. 12, 2021 on the Media Temple Weblog.

Tax time can undoubtedly be one of many extra joyless components of being self-employed. It’s in all probability no shock {that a} Lending Tree survey from 2020 discovered that 54% of individuals don’t look ahead to submitting their taxes.

It’s comprehensible. You’re employed so laborious all yr, you pay your quarterly tax funds to the federal government, after which you must dig by a whole yr’s value of information and report all the pieces level by level? Ugh. No thanks.

However what’s attention-grabbing in regards to the Lending Tree survey is that 58% of respondents anticipated to get a tax refund. I’m prepared to guess it’s as a result of they knew methods to maximize their tax deductions.

As a contract net designer or developer, there are a variety of deductions you may declare in an effort to cut back your taxable earnings and stroll away with a refund by April. And, actually, doesn’t that sound nice proper now? I wager plenty of us may use some more money.

Beneath, we’re going to have a look at 20 of the tax deductions try to be benefiting from.

20 tax deductions to assert in your tax return

Your taxable earnings is calculated as such:

Complete Earnings – Tax Deductions = Taxable Earnings

The better the deductions you may have, the smaller your taxable earnings turns into. If that quantity finally ends up being lower than what you initially estimated at first of the yr, you possibly can stroll away with a really wholesome tax refund.

As you put together your taxes, right here’s a guidelines to make sure you’ve claimed all of the deduction alternatives obtainable to you:

1. House workplace

If you happen to work at home (which most of us did in 2020), deduct the price of your own home workplace in your tax returns. That mentioned, there are two stipulations to this deduction.

  • Your private home workplace have to be the place you primarily do enterprise.
  • It must be completely used for enterprise.

Merely present the size of your own home workplace area — particularly if it’s a small space carved out of a bigger room — and enter them into the offered fields. The IRS will do the remainder.

2. Web charges

Your private home web prices cowl each your work hours in addition to your off hours. So, you’ll must do the mathematics to determine what number of hours you spend on-line for work as a share of your whole time. Then, deduct that share of your annual Web charges in your tax returns.

3. Utilities

You want the electrical energy, gasoline, and/or warmth to be working so as so that you can comfortably do enterprise in your house, proper?

Use the identical share as your web charges to calculate your utilities deduction.

4. Exterior workspaces

For these of you who don’t work at home, you may expense your exterior workspace prices. This consists of:

  • Workplace leases, together with any related utilities and wifi
  • Coworking area charges
  • Different exterior workspace prices (e.g. espresso store purchases, lodge or restaurant charges)

I notice this level won’t really feel as related for 2020. Nevertheless, for those who spent any time working outdoors your own home when issues have been “regular”, be certain that to assert these deductions regardless of how minor they could appear.

5. Tools

Usually, you purchase business-related gear with the intent of utilizing it long-term. This consists of:

  • Furnishings like desks, chairs, and lamps
  • {Hardware} like printers, scanners, and screens
  • Gadgets like computer systems, smartphones, and tablets

The IRS needs you to deduct these as depreciated belongings. That means, the price of the merchandise is written off in small increments over time.

6. Provides

Workplace provides will be deducted as common bills as long as they’re meant for short-term use. This may be objects like printer paper and notebooks.

7. Web site-related prices

Your web site is a important a part of your corporation, typically. Nevertheless, I’d argue it’s extra so the case when most individuals are caught at house and spending unusually giant quantities of time on-line.

So, any cash you spend to maintain your web site up and working ought to be deducted. This consists of:

If you happen to pay somebody to take care of your web site, you may embody these charges as properly.

8. Advertising and marketing & promoting

You bought to spend cash to generate profits, proper? Nicely, for those who’re spending any cash to market or promote your corporation, you may deduct these prices, together with:

  • Social media advertisements
  • Google advertisements
  • Sponsored content material on different websites

And since in-person conferences and networking weren’t actually attainable this previous yr, you seemingly spent fairly a bit of cash on advertising.

9. Software program & apps

Automation is the important thing to success (and to not drive your self loopy attempting to handle all the pieces by yourself). Any software program or app you employ to design web sites or handle your corporation will be deducted.

For a lot of net designers and builders, that is going to be one in all your greatest classes. Listed below are a few of the apps you would possibly expense:

  • Skilled design software program
  • Inventory content material web sites
  • Shopper onboarding instrument
  • Wireframing app
  • Prototyping software program
  • Cross-platform testing instrument
  • Accounting software program
  • Tax prep software program
  • Advertising and marketing automation software program
  • Social media administration software program
  • CRM

10. Cost processing charges

With most fee processors (assume PayPal and Stripe), you’ll be charged a 2.9% price on each transaction. When purchasers instantly wire funds to your banking account, you may count on wire switch charges there as properly.

Maintain monitor of those charges so you may deduct them as the price of doing enterprise!

11. Skilled help

Have you ever employed contractors or workers up to now yr? You may embody these related prices in your tax returns.

As well as, you may write off different skilled help from individuals like legal professionals, accountants, and enterprise coaches.

12. Networking & enrichment

With the intention to get forward in any subject, you might want to all the time be strengthening your abilities and dealing on buying new ones. You and your corporation additionally profit from making new connections.

If you happen to had additional time in your fingers final yr, or have been merely trying to shake issues up, you will have taken benefit of the overabundance of digital networking and academic alternatives.

If that’s the case, then you may write off any associated charges. For instance:

  • Taking programs
  • Attending skilled conferences
  • Signing up for webinars
  • Attending native meetups
  • Becoming a member of skilled associations

After all, for those who attended any occasions pre-pandemic in-person, you may write off all related prices as properly, together with attendance charges, meals, lodging, journey, and upgrades.

13. Journey-related bills

Have you ever needed to journey for work up to now yr? If not, then transfer onto the following deduction.

In case you have, then know that there are specific bills you may deduct in the event that they’re directed associated to your job:

  • Automobile mileage and gasoline
  • Parking
  • Transportation
  • Lodging
  • Shifting
  • Meals and leisure

14. Medical health insurance

When you can’t write off medical insurance for those who acquired it by an employer or your accomplice’s employer, you may write off insurance coverage premiums for those who bought a plan by {the marketplace}.

15. Skilled insurance coverage

There are different kinds of insurance coverage you would possibly must maintain you and, particularly, your corporation protected. You may write these off, too:

  • Legal responsibility insurance coverage
  • Renter’s insurance coverage (to your house workplace)
  • Auto insurance coverage (for those who drive your car for work)

In case you have workers, staff’ compensation insurance coverage can be deductible.

16. Skilled licenses

Relying on the place you’re employed and what kind of enterprise you use, chances are you’ll want a license for it. If you happen to pay for a enterprise license by your state or have included your corporation as an LLC, you may write these prices off.

17. Retirement plan contributions

Each greenback you place in the direction of your IRA – as much as 60% of your earnings – will be deducted. This doesn’t essentially have to be cash from your corporation both. If you happen to transferred your stimulus funds to your IRA, as an example, that counts, too!

18. Donations

Money contributions you make to a charitable group like church buildings, nonprofit foundations, veterans’ organizations, and so forth will be deducted.

19. Self-employment tax

Freelancers are required to pay self-employment tax. Your tax prep software program ought to calculate this in your behalf.

If you happen to’d wish to determine it out by yourself, use the Free Earnings Tax Calculator. Enter your gross wage, location, and submitting standing. Then, scroll all the way down to get your FICA, the entire you pay to Social Safety and Medicare. You may deduct half of this.

20. Unpaid invoices

This one actually relies on the way you concern and deal with invoicing. As an example, for those who use accrual accounting, you may declare your unpaid invoices. If you happen to use money foundation accounting, you may’t.

Accrual accounting isn’t widespread for freelancers although. You would wish to file all of your earnings as acquired, no matter whether or not the invoices had been paid for.

There’s a a lot better probability you’d be working this manner as an company. Even then, it’s not all the time the case because it’s a lot simpler to handle your money circulation once you function as a money foundation enterprise.

Wrap-up

As you may see, your skilled bills really do much more for you than simply allow you to develop and assist your corporation. They might help you pay much less in taxes and even get you a refund from the federal government come tax time.


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