Freelance taxes: A beginner's guide to filing taxes

As a solopreneur in 2025, you have the power to shape your career, pursue your passions, and create a work-life balance that truly fits you. But with this freedom comes the responsibility of managing your own taxes.

Whether you're a freelance writer, graphic designer, consultant, or any other type of independent contractor, understanding the tax landscape is crucial for your success. 

This beginner-friendly guide will equip you with the knowledge and self-employed accounting tools you need to confidently navigate freelance taxes in 2025 and beyond.

1. Declare business income
2. Determine your tax payments
3. Understand freelance tax deadlines
4. Discover freelance tax credits and deductions
5. Make the most of tax-advantaged retirement plans
6. Learn how to pay freelancer taxes quarterly
7. Consider hiring a tax professional

1. Declare business income

The first step in filing self-employment taxes is to gather all relevant business income from the filing season. The sources of your business income will determine the appropriate forms you need to file with the IRS.

Here are the most common tax forms for freelancers:

• Schedule C (Form 1040): You’ll document your business income and expenses here.
• Form 1099-MISC: A business that pays you over $600 for your goods or services should provide this form.
• Form 1099-K: If you received over $5,000 in payments from third-party payment processors (like PayPal) in 2024, you'll receive a 1099-K from those processors. This IRS rule went into effect for the 2024 tax year.

How you file your freelance taxes depends on how you've set up your business. Think of it like this: Your business has a legal identity, just like you do. This identity determines how the IRS sees your business and what taxes you'll pay.

The most common type for freelancers is a sole proprietorship. This essentially means you and your business are one and the same in the eyes of the law. It's simple to start, but you're personally responsible for any business debts. You report your business income and expenses directly on your personal tax return.

If you want more protection for your personal assets, consider an LLC (Limited Liability Company). This creates some separation between you and your business, so you're not on the hook for everything if things go wrong. 

There are also corporations, like S corporations and C corporations. These are generally more complex and better suited for larger businesses, but they can offer some tax benefits in certain situations.

Choosing the right structure can be tricky, but it's important to pick one that fits your needs and goals. A tax professional can help you figure out the best option for your situation.

2. Determine your tax payments

To succeed as a freelancer, you have to be proactive. Just like you have to take the initiative to find work, you need that same mindset to plan ahead for filing small business taxes—like income tax and self-employment tax.

Income tax

You’re responsible for reporting business income and expenses in a Schedule C form and deducting allowable expenses on your tax return. The record of your profits and losses will determine the amount of income tax you’re responsible for paying. 

Meticulously track your earnings and deductible expenses throughout the year with accounting software like QuickBooks to ensure accurate reporting.

Self-employment tax

Employers withhold each employee’s share of FICA and Medicare taxes from gross pay. Freelancers, on the other hand, must pay those taxes using Schedule SE (Self-Employment Tax). Currently, freelancers pay a 15.3% tax rate for FICA and Medicare taxes, with one-half of those taxes posted as a deduction from taxable income on Form 1040.

Sales tax

If your freelance business involves selling physical goods, or even certain digital products, you'll likely need to deal with sales tax. This will involve collecting sales tax from your customers and paying it to the appropriate state and local tax authorities.

Sales tax can be tricky, as the rules vary a lot from place to place. You might even need to collect different rates depending on where your customers are located. It's essential to research the specific sales tax laws in your state and any localities where you make sales. 

State tax

Just like you pay federal income tax, you may also need to file a state return. Each state has its own rules and rates, so it's important to check what applies where you live.

Even if you don't end up owing any taxes, you might need to file a state return. And similar to federal taxes, many states require freelancers to make estimated tax payments throughout the year. The good news is that states often have their own tax deductions and credits that can help lower your tax bill.

To find out the specifics for your state, check with your state's Department of Revenue. Tax preparation software or a tax professional can also help you navigate state tax requirements.

Tax liability

Planning ahead also helps you avoid paying penalties, fees, and interest on your tax underpayments. Accurately estimate your tax obligations, make timely estimated tax payments, and maintain thorough records of your income and expenses throughout the year. 

3. Understand freelance tax deadlines

Meeting tax deadlines is essential to avoid penalties and keep your freelance business running smoothly. 

Here's a breakdown of the key dates you need to know:

• January 31, 2025: Deadline for clients to send you Form 1099-NEC (for payments of $600 or more).
• January 31, 2025: Deadline for payment processors to send you Form 1099-K (for payments over $5,000).
• April 15, 2025: Tax Day! File your federal income tax return (and most state returns).
• April 15, 2025: Deadline to file for an extension if you need more time.
• October 15, 2025: Extended filing deadline if you requested an extension.

As a freelancer, it's easy for tax deadlines to sneak up on you. But with a little planning, you can stay ahead of the game. Here are a few tips to help you stay organized and avoid last-minute stress:

• Use a tax calendar: A visual calendar can help you see all the important dates at a glance.
• Set reminders: Use your phone, email, or calendar app to send you alerts as deadlines approach.
• Don't wait until the last minute: Gather your tax documents and information throughout the year so you're not scrambling when tax season arrives.

Meeting these deadlines is crucial for maintaining good standing with tax authorities and avoiding potential penalties.

4. Discover freelance tax credits and deductions

One of the best parts about being a freelancer is the ability to lower your tax bill by taking advantage of various freelance tax deductions and credits. These can significantly reduce your taxable income, putting more money back in your pocket.

Common deductions for freelancers

• Home office: If you have a dedicated space in your home used exclusively for your business, you can deduct a portion of your rent or mortgage, utilities, and other related expenses. For example, if your home office takes up 10% of your home's square footage, you could deduct 10% of those costs.
• Travel and hotel: Expenses for business trips, including airfare, accommodation, and 50% of meal costs, can be deductible.
• Utilities: If you have a home office, you can deduct a portion of your utilities, such as electricity, gas, and internet.
• Professional development: Courses, workshops, and conferences related to your field can be deductible.
• Advertising and marketing: Costs for promoting your freelance services, such as online ads, website fees, and printed materials, are deductible.
• Website: Expenses related to creating and maintaining your business website, including domain registration, hosting, and design, can be deducted.
• Software: The cost of software essential to your freelance work, like QuickBooks Self-Employed, design programs, or project management tools, can be deductible.
• Vehicle: If you use your vehicle for business purposes, you can deduct a portion of the expenses (mileage or actual costs) based on the percentage of business use.
• Unpaid invoices: In some cases, you may be able to deduct bad debt from unpaid invoices, but consult a tax professional for specific rules.
• Incorporation fees: If you formed an LLC or other business entity, you can typically deduct the costs of incorporation.
• Health insurance: As a freelancer, you can often deduct your health insurance premiums.
• Legal and professional fees: Fees for services like legal advice, accounting, and tax preparation can be deductible.

Tax credits are even better than deductions because they directly reduce the amount of tax you owe, dollar for dollar.

Helpful tax credits for freelancers:

• Earned income tax credit (EITC): This credit is for individuals and families with low to moderate income. The amount you receive depends on your income and number of children.
• Child tax credit: If you have qualifying children, you may be eligible for this credit, which can reduce your tax bill by up to $2,000 per child.
• Retirement savings contributions credit: This credit helps those with modest incomes save for retirement. Tax laws are complex and can change. It's always a good idea to consult with a tax professional or use reputable tax software to ensure you're claiming all the deductions and credits you're entitled to.

5. Make the most of tax-advantaged retirement plans

Tax-advantaged retirement plans can help you build your nest egg while enjoying some valuable tax benefits. 

Here's a simplified look at some popular options:

• Traditional IRA: This account lets you contribute pre-tax income, which lowers your taxable income now. Your money grows tax-deferred, and you'll pay taxes on withdrawals in retirement. It's ideal for those who anticipate being in a lower tax bracket during retirement.
• Roth IRA: With a Roth IRA, you contribute after-tax dollars, so there's no immediate deduction. However, your earnings grow tax-free, and qualified withdrawals in retirement are completely tax-free! It's a smart choice if you expect to be in a higher tax bracket later on.
• SEP IRA: This option is designed for self-employed individuals and small business owners. You can contribute a significant portion of your net earnings, and these contributions are tax-deductible. It's a great way to boost your retirement savings, especially if you have a high income.
• Solo 401(k): This plan allows you to contribute both as an "employee" and an "employer," allowing for higher contribution limits. It offers both pre-tax and Roth contribution options, giving you flexibility based on your tax situation.

The best retirement plan for you depends on your income, age, and financial goals. A financial advisor can help you weigh the pros and cons and choose the right plan for your needs.

6. Learn how to pay freelancer taxes quarterly

If you're a freelancer, you might need to pay estimated taxes quarterly—meaning you pay a portion of your expected tax liability every three months. This helps ensure you don't get hit with a huge tax bill at the end of the year and can help you avoid penalties for underpayment.

You'll likely need to pay estimated taxes quarterly if you expect to owe $1,000 or more in taxes when you file your return. This applies to most freelancers since taxes aren't automatically withheld from their payments.

Quarterly deadlines for 2025:

• April 15, 2025: First payment for income earned January 1 to March 31, 2025
• June 16, 2025: Second payment for income earned April 1 to May 31, 2025
• September 15, 2025: Third payment for income earned June 1 to August 31, 2025
• January 15, 2026: Fourth payment for income earned September 1 to December 31, 2025

To stay on top of your quarterly tax obligations, remember to estimate your income and deductions throughout the year. 

Project your freelance income and factor in your eligible business expenses. Then, use Form 1040-ES or tax software to calculate your estimated tax liability. You can make your payments online, by mail, or by phone.

7. Consider hiring a tax professional

Navigating the complexities of freelancer taxes can be daunting, especially when experiencing small business growth. Here is why you should consider hiring a tax professional:

• Expertise: Tax professionals know freelancer-specific tax laws to ensure compliance.
• Time-saving: They handle tax preparation, saving you time and avoiding stress.
• Risk reduction: Professionals minimize errors, preventing penalties and audits.
• Strategic advice: They offer tailored tax planning to optimize your savings.
• Peace of mind: With professionals managing taxes, you can focus on business growth.

While hiring a tax accountant may entail additional costs, the benefits they provide can far outweigh the investment. Consider consulting with a tax professional to determine the best approach for managing your freelance taxes.

Find peace of mind come tax time

Paying yourself as a freelancer means you’re responsible for both employer and employee tax obligations. Keeping track of your business income, expenses, and deductions can quickly become overwhelming without effective accounting software.

By engaging with accounting tools and seeking professional assistance when necessary, you can find peace of mind come tax time and confidently manage your freelance taxes with ease.