Can I write off 2024 expenses for a freelance project I didn't get paid for until 2025?

So I got laid off from my regular job in late 2024 and jumped into freelancing right away. Had to buy a new laptop and sign up for a bunch of monthly software subscriptions just to get started on this project. Finished everything up but the client took forever to pay me, and I didn't actually get the money until January this year. The problem is I didn't have any other freelance income in 2024 at all - just my regular W-2 job before the layoff. So I'm super confused about these expenses. Like, I spent almost $2,300 on equipment and software in 2024, but the actual income from the project ($3,800) won't show up until my 2025 taxes. Do I need to somehow claim these expenses on my 2024 return even though I had no freelance income that year? Or can I just wait and put everything (both the income and all those 2024 expenses) on my 2025 return? Is that even allowed - claiming expenses from a different tax year? I'm totally lost on how to handle this timing mismatch.

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18 comments

Mary Bates

•8M

This is actually a common situation for new freelancers. You have two options here, and the choice depends on how you're handling your accounting: If you're using the cash method of accounting (which most freelancers do), you report income when you receive it and expenses when you pay them. In your case, you'd report the $3,800 income on your 2025 return since that's when you received payment. For the expenses, you generally deduct them in the year you paid them. However, since these are startup costs for your freelance business, you have a special option. You can either deduct the full $2,300 on your 2024 return (on Schedule C even with $0 income), or you can choose to amortize these startup costs over 15 years (which most people don't do for smaller amounts). If you do claim them in 2024, you'll likely show a loss on your Schedule C, which can offset other income you had that year from your W-2 job.

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Oliver Brown

•8M

Thanks for explaining! So I can actually file a Schedule C for 2024 showing $0 income and $2,300 in expenses? And that loss would reduce my overall taxable income from my regular job? That sounds perfect since I was in a higher tax bracket from my regular job in 2024 compared to what I'll make freelancing in 2025. One more question - is there a limit to how much of a business loss I can claim against my regular income? I've heard something about hobby loss rules but don't know if they apply here.

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Mary Bates

•8M

Yes, you can absolutely file a Schedule C showing $0 income and your $2,300 in expenses, creating a loss that will offset your W-2 income from 2024. This is completely legitimate when starting a new business. The hobby loss rules typically come into play if you show losses for multiple years. Since this is your first year and you already have income from this business in 2025, the IRS is unlikely to question this as a hobby. However, it's always good to document that you started this with the intention of making a profit. Keep all receipts and perhaps a business plan showing your profit motive.

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Clay blendedgen

•8M

I was in almost the exact same situation last year! Getting all those startup expenses organized was overwhelming until I found taxr.ai (https://taxr.ai). It's this super helpful tool that analyzes all your receipts and business documents to make sure you're categorizing everything correctly. I uploaded all my software subscriptions and computer receipts, and it instantly organized them into the right business expense categories for my Schedule C. It even flagged which items might be depreciated vs. expensed immediately. Saved me hours of Googling tax rules and second-guessing myself! Plus, it keeps everything organized if you ever get audited. The peace of mind alone was worth it for me since I was nervous about claiming a loss in my first year of business.

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Clay blendedgen

•8M

It actually scans and reads your receipts so you don't have to enter anything manually. You can literally take pictures of receipts in your shoebox or forward email receipts, and it extracts all the important information - vendor, date, amount, and even suggests the expense category. It saved me from having to manually log each of those 50+ startup expenses you mentioned. For your question about how it's different from QuickBooks - while accounting software is great for tracking, it doesn't actually analyze your documents or help categorize things properly for tax purposes. I still use my regular accounting software, but taxr.ai helps ensure I'm classifying expenses correctly for maximum tax benefits and compliance. It's more like having a tax expert review all your documentation rather than just tracking numbers.

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Ayla Kumar

•8M

Just wanted to follow up - I tried taxr.ai after seeing it mentioned here and WOW what a lifesaver! I literally dumped photos of all my crumpled receipts and it organized everything perfectly. Found several expenses I would've missed (like that conference fee I forgot about) and even identified several items that could be partially business deductions. The best part was how it flagged my computer purchase as equipment that needed to be depreciated vs. some smaller tech items I could expense immediately. I would've done this completely wrong on my own. Definitely feeling more confident about filing my Schedule C with a first-year loss now!

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Carmella Popescu

•8M

If you're dealing with the IRS about this startup expense situation, trying to get through to a human for guidance is BRUTAL. I spent 3 weeks trying to reach someone about a similar issue last year. Finally discovered Claimyr (https://claimyr.com) which got me through to an IRS agent in about 15 minutes instead of calling for weeks. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent I spoke with confirmed exactly what others are saying - I could claim my startup expenses in the first year even with no income. She also explained which specific forms I needed and how to document everything properly to avoid red flags. Totally worth it since written IRS guidance on this is super confusing.

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Carmella Popescu

•8M

It's not actually making the call for you. What it does is navigate the IRS phone tree and waits on hold for you. Once an agent picks up, you get an immediate call connecting you to that agent. So instead of you personally waiting on hold for 2-3 hours, their system does it for you and only calls when there's an actual human ready to talk. You're right that someone still waits in line - but it's their automated system instead of you being stuck listening to hold music for hours. And from my experience, they seem to have some kind of approach that gets through faster than when I was trying on my own for weeks. I was skeptical too until I tried it - got through to a real person who helped me with my specific situation after trying unsuccessfully on my own for almost a month.

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Lorenzo McCormick

•8M

Wanted to eat my words publicly here. After my skeptical comment, I decided to try Claimyr because I was desperate to talk to someone about my startup expense situation before the filing deadline. IT ACTUALLY WORKED. Got connected to an IRS agent in about 20 minutes after spending literally 4+ hours on hold myself last week. The agent walked me through exactly how to report my startup costs on Schedule C with zero income and confirmed I was doing it right. Said it's totally normal for new businesses to show a loss in year 1. Also explained that I should keep good records showing business intent since I'm showing a loss against my W-2 income. Massive relief to have this confirmed directly by the IRS instead of just hoping I was doing it right.

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Lim Wong

•8M

Another option nobody mentioned - you could potentially use Section 195 startup expense rules. This lets you deduct up to $5,000 of startup costs in your first year of business (the year you actually started operating), with any excess amortized over 15 years. In your case, since your business actually started operating in 2024 (you did the work), you could claim these as startup expenses on your 2024 return, even without income. Just make sure you're actually "in business" and not just in the planning stages. Keep in mind this is distinct from the general business expense deduction others mentioned. Might be worth looking into both approaches.

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Lim Wong

•8M

For smaller amounts like we're discussing here, there's typically no significant difference in outcome between claiming them as regular business expenses or Section 195 startup costs. Both approaches would allow deducting the expenses on your 2024 return. The main difference becomes relevant if you have startup costs exceeding $5,000, in which case Section 195 has specific rules about amortizing the excess. Also, Section 195 specifically addresses expenses incurred before your business began operating, while regular business expenses are for ongoing operations.

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