Freelancers get extra money in their pockets
Are you self employed person or a freelancer? Are you inconvenienced with paying taxes? Then there is some good news for you. There is going to be a new tax law to which self employed people and freelancers can benefit as they get a 20% pass-through deduction.
This pass-through deduction is available for pass-through business owners, such as S-corps, LLCs, and partnerships, but it’s also available to 1099 contractors, freelancers, side-hustlers, and sole-proprietors.
The business income must be below $157,500 (that is $315,000 for people who are married). The deduction is calculated as 20% of “qualified business income”, but also cannot exceed 20% of the difference between your taxable income and any capital gains. So if you have relatively large itemized deductions or capital gains, your deduction will be limited.
Freelancers and self employed personnel make up a significant part of the economy.
Many indpendent workers are signing up for spousal programs or signing up for the Medicare program as well. In January of this year, the Department of Labor proposed to expand access to Small Business Health Plans, which didn’t provide the full range of benefits under the Affordable Care Act. Due to this, independent workers would be able to join the Small Business Health Plans.
With that being said, the issue at hand is the tax deduction thanks to the reform. As mentioned before, anyone with a yearly income lesser than $157, 500 will be able to get it along with married people who have an income up to $315, 000. This deduction is expected to be the accelerator for the self employed market and much expansion will be seen in the future.
However the fact of the matter is that many self employed personnel are unfamiliar with the new tax law and the taxes that they owe in general. A survey found that “36 percent of self-employed workers admit they don't pay taxes, and nearly one in 10 self-employed workers don’t know about the recent tax reform. More than a fourth of self-employed workers think the tax reform will cause them to pay more in taxes, and 14 percent of self-employed workers are currently behind on their taxes.” With these statistics in mind, there needs to be a lot of awareness created among the self-employed market about these tax laws so their benefits can be reaped properly.