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Don't forget to save around 30% of your freelance income for taxes! I learned this the hard way my first year. The 1040-ES helps you pay quarterly, but many newbies (including myself) underestimate how much they'll actually owe. Self-employment tax (15.3%) + regular income tax can add up fast. Also, track EVERYTHING for deductions - home office, software, equipment, professional development, portion of internet/phone bills. I use a separate credit card just for business expenses to make it easier at tax time. This can significantly reduce your taxable income.
Thanks for this tip! Does it matter what method I use to track expenses? Like can I just keep a spreadsheet or do I need special software? Also, for the home office deduction, is it better to do the simplified method or the regular one?
A simple spreadsheet works perfectly fine for tracking expenses - just make sure to keep all receipts too (digital copies are okay). I personally use a Google Sheet where I log the date, amount, vendor, and category of each expense. Some people prefer apps like QuickBooks Self-Employed or FreshBooks, but they're not necessary when you're just starting out. For the home office deduction, it really depends on your situation. The simplified method is just $5 per square foot up to 300 square feet (max $1,500 deduction), which is super easy. The regular method can potentially get you a larger deduction if you have a big office or high home expenses, but requires much more detailed record-keeping and calculations. I'd start with the simplified method your first year, then see if it's worth doing the math for the regular method next year.
Anyone know if it's too late to start making quarterly payments for 2025 if I started doing gig work in January but didn't know about these forms until now in August? Will I get penalized?
You can still catch up! Make a payment now that covers what you should have paid for Q1 (April) and Q2 (June). Then stay on track with Q3 (Sept) and Q4 (Jan). You might face a small penalty for the late payments, but it's WAY better than waiting until tax time to pay it all! The penalty is basically an interest charge.
Here's a tip if you're doing your own bookkeeping: create a separate "Sales Tax Collected" account in your accounting software as a current liability (not income). When Ebay collects the tax, you'd record it going into this account, and when they remit it to the state, it leaves this account. This keeps it completely separate from your income accounts and gives you a clean trail if you ever get audited. The balance should always zero out if Ebay is handling all the remittance for you.
What about if some of my sales are direct through my website where I have to collect and remit the tax myself? Do I treat those differently than the Ebay collected ones?
For sales through your own website, you'll use the same principles but with a few extra steps. You'll still record the collected sales tax in a liability account (not income), but since you're responsible for remitting it yourself, the balance won't automatically zero out like with Ebay. You'll need to regularly (monthly, quarterly, or annually depending on your state requirements) transfer that money to the appropriate tax authorities. When you make those payments, you'd record them as drawing down from your sales tax liability account. This keeps your income clean and gives you a clear record of your tax collection and remittance activities.
Important note: if you're selling on multiple platforms, double-check the marketplace facilitator laws for each state you sell into. Some states have different thresholds for when marketplaces must collect taxes vs when sellers need to handle it themselves. It gets complicated fast!
I've been using TaxJar for this and it's been pretty helpful for tracking all the different state thresholds. The economic nexus rules are such a pain to keep up with manually.
Don't forget to look at Healthcare.gov options! Since losing your job is a qualifying life event, you can enroll now outside of open enrollment. Depending on your current income while unemployed, you might qualify for significant premium subsidies. My husband and I saved almost $450/month by getting him an individual plan through the marketplace vs adding him to my employer plan as a domestic partner. The coverage wasn't identical but it was close enough for our needs.
I second this. When I lost my job last year, I qualified for a plan that was only $87/month with a $1000 deductible because of the subsidies. WAY cheaper than COBRA or going on my partner's plan. Definitely worth checking out.
I work in benefits administration and wanted to add some clarity here. The imputed income is specifically for the value of benefits that cover non-tax dependents. The way it typically works: 1. The employer calculates the "fair market value" of covering the domestic partner 2. They subtract what the employee pays post-tax for this coverage 3. The difference is added as imputed income to the employee's W-2 I recommend your fiancΓ©e ask HR for a detailed breakdown of how they calculated the $1,675.21 figure. That seems unusually high unless it's including multiple benefits (medical, dental, vision, etc.) or it's a very premium health plan.
Has anyone else dealt with county property tax reassessment after inheriting rental property? In my case, continuing the federal tax depreciation was straightforward, but I got hit with a massive property tax increase because the county reassessed the property value when it transferred to me. Might want to check if that's an issue in your area.
One more tip - don't forget to depreciate the building separately from the improvements. The building itself (not including land) depreciates over 27.5 years from your date of inheritance based on the stepped-up basis. But as others said, the specific improvements like the roof continue on the original schedule. I messed this up my first year and had to file an amended return.
Noah Lee
Don't forget that if you claim your parent as a dependent, you might qualify for head of household filing status which gives you better tax rates than filing as single! You need to provide more than half the cost of keeping up the home where your parent lives, but it sounds like you do that already.
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Evelyn Kim
β’Does that head of household thing really make a big difference? I've always just filed as single. Is it complicated to change to that?
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Noah Lee
β’Head of household makes a HUGE difference! For 2025, the standard deduction for HOH is around $20,800 compared to just $14,600 for single filers. That's over $6,000 more of your income that won't be taxed! It's not complicated at all to change your filing status. When you prepare your return, you just select "Head of Household" instead of "Single" and the tax software or forms will automatically apply the better tax rates and higher standard deduction. The requirements are that you're unmarried, pay more than half the cost of keeping up the home, and have a qualifying person living with you (your dependent parent counts for this).
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Ava Hernandez
Has anyone dealt with the situation where a parent gets too much Social Security to qualify as a dependent? My dad gets about $2,300/month and I heard there's a gross income limit.
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Isabella Martin
β’The gross income limit only applies to taxable income. Social Security is only partially taxable or not taxable at all depending on total income. Check out the worksheet in IRS Publication 501 for determining if Social Security counts toward the gross income test.
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