Understanding Freelance Tax Write-Offs
For freelancers, independent contractors, and sole proprietors, tax deductions (or write-offs) are the primary way to reduce tax liability. The IRS allows you to deduct expenses that are "ordinary and necessary" for running your trade or business. An ordinary expense is one that is common and accepted in your industry. A necessary expense is one that is helpful and appropriate for your trade.
When you write off an expense, you subtract its cost from your gross business income. This reduces your net self-employment profit, which is the amount subject to both self-employment tax (15.3%) and ordinary federal/state income taxes. Therefore, every dollar written off saves you a percentage of that dollar in taxes, depending on your marginal tax bracket.