Freelancing earning offers a variety of benefits. You can choose from a wide range of projects and clients, and you have more time to devote to your clients. In this day and age, time is at a premium, so freelancing can help you make the most of it. In this article, we’ll discuss some of the benefits and costs of freelancing, as well as how to save for retirement.
Costs of freelancing
The costs of freelancing vary based on your work schedule and the business you’re running. For example, if you work from home and operate an S-Corp, you’ll have to take a different approach to computing your income. In addition, you will need to calculate the number of hours you spend doing billable work each week.
In addition to the time you spend writing and researching, you’ll also have to deal with the costs of billable expenses. Some freelancers charge by the hour, while others charge by the project. Either way, determining what you’re going to charge is an important first step toward becoming a viable freelancer.
Taxes
Whether you’re working for yourself or for a business, your freelance income will need to be reported on your income tax return. This means submitting Form 1040 and paying your taxes on time. However, some freelancers don’t take full advantage of the tax deductions they are eligible for, and end up paying more tax than they have to. To reduce your tax liability, you should record your expenses and income, and itemize these expenses. Detailed bookkeeping will help you prove these expenses were necessary.
If you’re using a home office, you can deduct some of your expenses. These expenses include your utilities such as gas, electricity, heating, air conditioning, and phone service. Another deduction you can claim is for classes that you take related to your freelance profession. Additionally, any costs associated with your freelancing website are deductible. You can also deduct expenses for software you use exclusively for your business.
Benefits
Freelancing can provide many benefits for the working individual, from a better work-life balance to a more satisfying career. It can also give the individual the opportunity to do work that suits their personal interests and skills, allowing them to fully utilize their talents. These advantages are not only personal, but can also result in higher quality results.
Traditional employees have a very specific job description and seldom get to try out a wide variety of projects. While freelancing can provide a higher income, it also has its drawbacks. Unlike conventional jobs, freelancers can control their workload, which can lead to burnout. In addition, they can use their time to learn new skills and expand their knowledge in many fields.
Retirement savings
When it comes to saving for retirement, freelancers have several options. They can start with the SEP IRA plan, which is available at most banks and charges few fees. They can also contribute up to 25 percent of their income, which is deductible. In 2014, they can contribute up to $6,000 a year, and if they are over 50, they can put away another $1,000 as a catch-up contribution.
Another option for saving for retirement is a traditional IRA. Freelancers who run their own businesses can set up a SEP-IRA, which is similar to a traditional IRA. SEP-IRAs are tax-deductible, making them a great choice for freelancers.
Time commitment
When you decide to make the transition to freelancing, you will need to consider how much time you can devote to it. This commitment will depend on the type of projects that you want to complete, your rates, and whether you choose to work part time or full time. While you are not tied to a set schedule, it is essential to be available to clients.
