Up to date for tax yr 2022.
You personal a thriving graphic design enterprise. Maybe you create eye-catching logos or complete business web sites. What you might not spend an excessive amount of time on is considering submitting your taxes as a contract graphic designer.
As an impartial contractor or freelancer, you may be capable to decrease your revenue (and consequently pay much less tax) by claiming sure enterprise bills as deductions in your annual tax return. You’ll report that info on Schedule C (Type 1040), Revenue or Loss from Enterprise.
Based on the Inside Income Service (IRS), your exercise qualifies as a “enterprise” in case your major objective is for producing revenue or revenue. You additionally need to be concerned in your enterprise with “continuity and regularity.” A passion or sporadic exercise shouldn’t be a enterprise.
When you can justify {that a} enterprise expense is each “peculiar and mandatory,” it is likely to be deductible. The IRS defines an peculiar expense as one that’s widespread and accepted in your commerce or enterprise (right here, graphic design). An expense is important whether it is “useful and acceptable” to your commerce or enterprise. It additionally doesn’t need to be indispensable to be thought of mandatory.
When claiming bills to your revenue tax return, make sure that they’re immediately associated to your graphic design enterprise as a sole proprietor, and never for another enterprise you may function or to your private use.
Laptop
The obvious software you want (and possibly the most costly) is your laptop. Fortuitously, you possibly can declare it together with any displays, printers, and different {hardware} as a tax deduction. The total price of the merchandise is tax-deductible so long as you employ it completely for enterprise. When you additionally use the merchandise for private use, your deduction is proscribed to the enterprise use share.
When it comes time to file your return, there are two alternative ways you possibly can deduct these gadgets. You possibly can select to depreciate them and unfold the deduction over a variety of years, or you possibly can write the complete price of the merchandise off on the return of the yr you bought the gadgets.
Graphic design enterprise bills
Based on Jodi Neufeld, net and graphic designer at Jodi Neufeld Design, these are just a few bills freelance designers can deduct when submitting taxes to scale back that tax invoice:
- Web site internet hosting
- Cloud storage
- Electronic mail accounts
- Fonts, graphics, and templates
- Programs, lessons, and coaching
- Training subscriptions similar to Lynda.com or Skillshare
- Instagram analytics packages
- Paid adverts on social media similar to Fb, Instagram, and Pinterest
- Software program subscriptions similar to Adobe Illustrator, Photoshop, and InDesign
- Consumer useful resource administration instruments similar to Dubsado
- Venture administration software program
- Software program to share content material with purchasers, similar to Contentshare or Invision
Normal bills
Graphic design enterprise homeowners normally have a number of the identical normal bills that different enterprise homeowners have, for instance:
- Cost processing charges
- Authorized and different skilled companies
- Enterprise licenses and registration charges
- Workplace provides and postage
- Enterprise insurance coverage
Enterprise use of your own home
When you work at a house workplace slightly than at a business studio, you might deduct some home-related bills. You possibly can report these direct prices on Type 8829, Bills for Enterprise Use of Your Dwelling. You can too use the simplified methodology to calculate the enterprise use of your own home as described in Schedule C kind directions.
Recordkeeping
A very powerful piece to submitting taxes as a contract graphic designer is maintaining full and orderly data of all of your revenue and bills. Good recordkeeping will make finishing your annual revenue tax returns a lot simpler. And also you don’t need to get fancy along with your recordkeeping. A easy spreadsheet documenting all exercise works. Simply make sure that it contains all purchases, dates of bills, enterprise use, time spent finishing a process or job in addition to any income earned.
It’s additionally crucial to maintain a log of receipts, invoices, and another documentation to again up your purchases. Having that info available will enable you to if the IRS has questions on your returns, particularly your expense deductions.
