Most freelance writers work from home. While that helps to cut down on travel costs, unless you have business meetings or conferences you want to attend, there are other costs associated with home offices. There is some good news when it comes to tax time for freelance writers.
There are a number of home office costs that you can deducted as expenses for business. That will keep your profit down, so you don’t pay as much tax to Uncle Sam.
Here are some of the home office costs that you may or may not be aware of.
The Electricity, Gas and Room Costs
When you work from home, you can’t get away from using the electricity. At the same time, there may be gas costs if that is the way the heating is powered. If you’re powered through oil, there are even more costs incurred. Then there is the cost of your rent/mortgage.
The U.K. offers a very simple way of working out the cost for all this if you don’t want to faff around with bills and paperwork. You get a standard rate depending on the amount of hours that you work in a month. The minimum you should work is 25 hours. You can get between £10 and £26 for the month depending on your hours.
However, you can also claim a percentage based on the number of rooms and time you’re in those rooms. For example, we have three rooms in the house (not including the bathrooms and kitchen), and one of those rooms is used for business for at least four hours a day. I work out the total amount each month based on the actual amount of time I’ve worked. I then turn that into a percentage and claim a percentage of my rent, gas and electricity as a business expense.
Internet and Phone Costs
You will need an internet connection or the cheapest business wifi to be a freelance writer. The good news is you can claim some of this as a home office cost when it comes to tax time as a freelance writer.
You will need to work out the percentage of use that is business, and then work out the percentage of cost. This is your allowable expense. It could be the percentage of a monthly bill for the percentage of data allowance you use if that is the way you get your internet.
The same applies to phone costs—landline or mobile. You can claim the business use of your phones as an expense.
I love my stationery. I have notebooks for various projects I’m working on, and have different coloured pens for all my needs. All receipts are kept for tax time as a freelance writer. Because my stationary is used for business use, it all comes off as a home office cost. Those that are bought for personal use will be crossed out on the receipt or purchased separately to make sure I don’t include them.
You can claim your stationery costs when they are for business use. This could be for post-it notes, your Montblanc pens and pencils or even stamps if you send things by mail—I have done in the past. You’ll be surprised by the amount those notebooks can add up!
Software and Subscription Costs
Freelance writers need subscriptions and software for their job. It could be a subscription to a magazine for your work, or a license of Microsoft Office. Whatever it is, you can claim these costs when it comes to tax time as a freelance writer.
You wouldn’t have them if it wasn’t for business. However, you do need to think about personal use. If any of them are used for any personal needs, you will need to work out the percentage and deduct that percentage from the total cost.
Keep copies of all receipts and proof of direct debits. This is important in case you are audited.
You’ll be surprised at the home office costs that you can claim. Tax time as a freelance writer can be complicated with all these extra costs, which is why I highly recommend hiring an accountant to work it all out for you. That way you won’t miss anything!
Have you paid your taxes? Do you have home office costs? Could you deduct them from your business profits to save money at tax time?
10 thoughts on “Tax Time as a Freelance Writer: Claiming Your Home Office Costs”
So far, I haven’t really made enough money to warrant the time needed to calculate the costs I could claim.
Hopefully things will change and I will need to look into this more.
Thanks for the heads up 🙂
It’s worth thinking about for the future, Victoria. You’d be surprised at the amount that you can end up saving. I’ve been able to drop my profits by thousands over the years, and saved a load on tax!
This is so helpful! I do my taxes with the TurboTax program but sometimes I’m not sure what costs I should deduct. This was a great article.
I’ve never heard of TurboTax. Is it for US or UK taxes? Glad the article helps 🙂
I have been claiming the costs of my business, even when I wasn’t earning – Great post! Thank you 🙂
These are all really great tips. It’s my first year doing income taxes as a freelancer so these will come in very handy
Thanks, and I really hope they help you with your taxes this year. I remember my first year. I spent hours looking over receipts to make sure everything was perfect. That was before I had an accountant friend helping me.
I haven’t thought about money at all!
-Your tips are good!
These are great tips! I have been doing this for several years now; I use TaxAct Online and it helps calculate the allowable percentage automatically. It does help decrease self-employment taxes!
I’ve never heard of TaxAct Online, K. Lee. Is that an American piece of software? That might be why I’ve not heard of it, but it sounds like it could be really useful.