The first step in tax planning for freelancers and side-hustlers is to understand the different types of business income and expenses. Business income is any money that you earn from your freelance business or side hustle. Business expenses are any costs that you incur while running your business.

Some common types of business income include:

• Fees for services rendered
• Sales of products
• Commissions
• Royalties

Some common types of business expenses include:

• Office supplies
• Equipment and software
• Rent and utilities
• Travel expenses
• Marketing and advertising expenses
• Legal and professional fees

Here are in-depth explanations of some important business deductions:

Home office deduction

If you work from home, you may be eligible to deduct a portion of your home expenses as a business expense. This is known as the home office deduction. To qualify for the home office deduction, you must use your home exclusively and regularly for business purposes.

Business travel expenses

If you travel for business, you can deduct your travel expenses, such as airfare, lodging, and meals. To deduct business travel expenses, you must keep detailed records of your travel.

Equipment costs

If you purchase equipment for your business, you can deduct the cost of the equipment over time. This is known as depreciation. To depreciate equipment, you must keep a depreciation schedule.

Self-employment tax deduction

As a freelancer or side-hustler, you are subject to self-employment tax. Self-employment tax is a combination of Social Security and Medicare taxes. You can deduct 50% of your self-employment tax from your income taxes.

Health insurance premiums

If you pay health insurance premiums for yourself and your family, you can deduct those premiums from your income taxes. To deduct health insurance premiums, you must be self-employed and have a net profit from your business.

Retirement contributions

If you make retirement contributions to a self-employed retirement plan, such as a SEP IRA or Solo 401(k), you can deduct those contributions from your income taxes.

Education expenses

If you take education courses to improve your skills for your freelance business or side hustle, you may be able to deduct the cost of those courses from your income taxes. To deduct education expenses, the courses must be directly related to your business.

Marketing and advertising expenses

If you spend money to market or advertise your freelance business or side hustle, you can deduct those expenses from your income taxes.

Legal and professional fees

If you pay legal or professional fees for your freelance business or side hustle, you can deduct those fees from your income taxes.

Interest on business loans

If you have a business loan, you can deduct the interest paid on that loan from your income taxes.

Charitable contributions

If you make charitable contributions from your business income, you may be able to deduct those contributions from your income taxes. To deduct charitable contributions, the contributions must be made to qualified charitable organizations.

Here are some statistics about freelancers:

• According to the IRS, 36.2% of the U.S. workforce is self-employed.
• The average self-employed worker earns $68,500 per year.
• Self-employed individuals are more likely to be audited by the IRS than traditional employees.
• The average tax refund for self-employed individuals is $2,800.

There are many tax deductions available to freelancers and side-hustlers. By taking advantage of all the deductions you're eligible for, you can save money on taxes and grow your business.