Featured Snippet Summary

Freelancers and gig workers in the U.S. must understand three tax basics: claim business write-offs to reduce taxable income, choose between an LLC or sole proprietorship for legal and tax benefits, and budget for the 15.3% self-employment tax that covers Social Security and Medicare.

Part 1: Top 12 Tax Write-Offs for Freelancers and Gig Workers

A tax write-off is something you spent money on for your work that the IRS lets you subtract from your income before taxes. This means you pay tax only on your profit, not your total earnings.

Think of it like this: If you make $50,000 but spend $10,000 on your business, the IRS only taxes you on $40,000.

The 12 Most Common Write-Offs

  • Home Office: A desk space in your apartment – must be used only for work.
  • Internet & Phone Bill: Part of your Wi-Fi and phone plan – deduct only the % used for work.
  • Computer & Equipment: Laptop, printer, camera – keep receipts for 3+ years.
  • Software Subscriptions: Canva, Zoom, QuickBooks – monthly SaaS tools count.
  • Marketing & Ads: Facebook/Google Ads, flyers – anything spent to get clients.
  • Travel Expenses: Flights, hotels for client meetings – save receipts + note business purpose.
  • Vehicle Use: Gas, mileage, car repairs for client trips – track miles with apps like MileIQ.
  • Meals with Clients: Coffee or lunch meetings – only 50% of meal costs are deductible.
  • Office Supplies: Pens, notebooks, paper, postage – small but adds up!
  • Professional Services: Accountant, legal advice – yes, paying for tax help is deductible.
  • Education & Courses: Online classes, certifications – must relate to your work.
  • Health Insurance (Self-Employed): Monthly premiums – deductible if you’re not covered by another job.

💡 Pro Tip: Keep a separate bank account for your business. It makes write-offs super easy to track.

Part 2: LLC vs Sole Proprietorship — Which Saves More on Taxes?

Most freelancers start as a sole proprietor by default. But some switch to an LLC (Limited Liability Company) for extra protection and tax benefits. Let’s break it down simply.

Sole Proprietorship

  • Easiest and cheapest to start (no paperwork).
  • You and the business are the same person legally.
  • All profits are taxed as your personal income.

LLC (Limited Liability Company)

  • Costs money to set up (varies by state, usually $50–$300).
  • Your personal stuff (car, house, savings) is protected if the business is sued.
  • You can choose how you want to be taxed (big advantage).

Comparison

  • Setup Cost: Sole Proprietorship = $0; LLC = $50–$300 (state fee).
  • Legal Protection: Sole Proprietorship = ❌ None; LLC = ✅ Protects personal assets.
  • Taxes: Sole Proprietorship = Self-employment + income tax; LLC = Flexible (Sole Prop or S-Corp).
  • IRS Paperwork: Sole Proprietorship = Very simple; LLC = Slightly more paperwork.
  • Best For: Sole Proprietorship = Beginners, side hustlers; LLC = Growing businesses.

💡 Pro Tip:
– If you make under $40,000 a year freelancing, a sole proprietorship is usually fine.
– If you’re making $60,000+ consistently, an LLC taxed as an S-Corp might save you thousands on self-employment taxes.

Part 3: Self-Employment Tax Explained — How Much Will You Owe?

you. But when you’re self-employed, you have to pay both parts yourself. That’s called self-employment tax.

The Numbers (2025 rates)

  • Self-employment tax = 15.3% of your net income.
  • 12.4% for Social Security.
  • 2.9% for Medicare.

Example: If you make $50,000 net profit, your self-employment tax is about $7,650.

But Here’s the Good News

  • You can deduct half of this tax on your income tax return.
  • This doesn’t erase the tax, but it lowers your taxable income.

Quick Example

  • Earn $60,000 freelancing.
  • Subtract write-offs → Net income = $45,000.
  • Self-employment tax (15.3%) = $6,885.
  • You deduct half ($3,442) → reduces taxable income.

Pro Tips to Make Taxes Easier

  • Quarterly Payments: The IRS expects freelancers to pay taxes 4 times a year (April, June, September, January).
  • Use Tax Software: Tools like TurboTax Self-Employed or QuickBooks Self-Employed.
  • Save 25–30% of Every Payment into a “tax savings account.”
  • Hire a Tax Pro: If you’re making $50k+ freelancing, an accountant can save you more than they charge.

Final Thoughts

Being a freelancer or gig worker in the U.S. means you’re your own boss — but also your own tax department. The good news is, once you learn the basics:

  • Write-offs help you pay tax only on profit, not gross income.
  • Choosing between an LLC or Sole Proprietorship depends on your income and growth goals.
  • Understanding self-employment tax keeps you from being surprised at tax time.

Taxes don’t have to be scary. With smart planning (and maybe a little help), you can save money, avoid penalties, and keep more of what you earn.

Frequently Asked Questions (FAQs)

  • What are the best tax write-offs for freelancers?
    Freelancers can deduct expenses like home office, internet, equipment, software, travel, marketing, and health insurance premiums.
  • Should I choose an LLC or a sole proprietorship for taxes?
    A sole proprietorship is cheaper and simpler, but an LLC offers liability protection and potential tax savings if your income is higher.
  • How much is self-employment tax in 2025?
    The self-employment tax rate is 15.3% of net income — 12.4% for Social Security and 2.9% for Medicare.
  • Do freelancers pay quarterly taxes?
    Yes. Freelancers and gig workers must pay estimated taxes quarterly (April, June, September, January) to avoid IRS penalties.
  • How can freelancers lower self-employment taxes?
    You can lower taxes by maximizing write-offs, contributing to retirement accounts (like SEP IRA), and choosing LLC with S-Corp election if eligible.