Taxes and Freelancers
How the Trump Tax Reform Hurts Freelancers and the Self-Employed
Over the next week and a half we will try to explain how the evolving tax reform legislation can affect you, depending on your location, whether you are a student, a homeowner, and so forth. The US tax system is mind-bogglingly complex, we will try to keep it simple.
According to recent surveys about 40% of the U.S. workforce is composed of contingent workers operating outside of traditional employment structures - that means those who freelance, are self-employed, or have microbusinesses. That's a huge segment of the population and if you include yourself among it, then you know how important things like itemized deductions are to your end of year accounting.
Itemized Deductions and Trump Taxes
The proposed House and Senate tax bills would either repeal all itemized deductions or severely limit them. In lieu of this they are increasing the standard deduction, but for many self-employed, itemized deductions (the daily expenses and costs of doing business) tend to total higher than what this increased standard deduction would be for the year. So it is a major loss!
And while many small businesses would gain a deduction of 17.4% of their income with the Senate tax bill, this does not apply to service businesses. That includes almost any small business that provides an intangible product such as accounting, design, landscaping, medical, education, consulting, and beauty services, and so much more - the list is very long!
In summary, if you are self-employed, a freelancer, and/or small business owner operating in one of the service businesses, you will be losing out in both the current House and Senate tax bills.
The votes on the tax bill are taking place this week and next.
1. CALL, CALL, CALL your senator and your representative. Let them know how the tax bill will affect you personally! We've heard from senate offices that not enough people have been calling on the subject, and they need to hear your voices on taxes!
Capitol Switchboard 202-224-3121
USE THIS SCRIPT (feel free to ad-lib, of course)
Hi Sen/Rep ____
I am calling to express my concern over the current versions of the tax bill that does a real disservice to self-employed/freelancers/small business-owners like myself. We rely on the ability to deduct the daily expenses and costs of doing business as an important accounting tool to keep our businesses afloat and running smoothly, especially for those of us operating on a small scale. Expanding the standardized deduction often does not equal the costs of business that we would be able to write off in itemized deductions. I cannot support the current tax bill as it stands, because it undermines the poor, middle class, and many self-employed small business owners in order to give a huge tax break to the wealthy and big corporations. I urge you not to support this tax bill.