If you’re new to the freelance game you might feel overwhelmed when it comes time to file your taxes.
I’ve been doing this for quite a while, with the help of a great accountant who keeps me on track and does the number crunching so I don’t have to sit there struggling with a calculator going line by line.
If you earned $400 or more in freelance income in 2026, you must report this to the IRS on your form 1040.
How to Account for Business Expenses as a Freelancer
You have two ways of filing your taxes as a freelancer. You can:
- take a standard deduction, or you can
- itemize your business expenses.
If you did not spend a lot on business related things, then do some quick calculations to determine if it’s more in your favor to take the standard deduction. But if you racked up some bills for your business, then pull out schedule C to file along with your 1040 form.
Schedule C is for reporting net profit or loss by itemizing business expenses.
What Counts as a Tax Deductible Business Expense?
The IRS gives freelancers and business owners myriad opportunities to lower their tax owed by claiming related expenses. You should have receipts for everything. They’re needed in the event of an audit.
Keep in mind that if you mostly work online, any membership that you signed up for related to your business is tax deductible.
All of the receipts for business purchases made over the course of the year can be found in your login area of each account you opened.
So for example, if you paid for web hosting, then log into the customer area of your web hosting account.
Navigate to the billing section, and that is where all of your past payments will be listed. You should be able to download a record of each payment as a PDF file. If you paid monthly, then there will be 12 receipts to download.
Download each PDF to your computer and save it in a file labeled 2025 taxes, or whatever you prefer to label it as.
What to Itemize on Schedule C
Let’s list out some business expenses to help you lower the total amount owed.
- Percentage of rent or mortgage for office space in home (check the IRS website for specifics)
- Office furniture and accessories
- Business related equipment and vehicles (100% tax deductible in 2026 even if financed or paid by credit card)
- Landline office phone
- Wireless phone
- Internet
- Client meals (currently 50% tax deductible)
- Travel expenses
- Gas (70 cents per gallon in 2026)
- Computer related purchases
- Web hosting
- Domain names
- Email marketing
- Ecommerce services paid, ie for marketplace sites like Etsy or Shopify
- Paypal fees
- Advertising fees ie paid Facebook ads
- Business coaching memberships
- Digital products/memberships
- Content related purchases
- Memberships for online tools like video editors, design programs like Canva
- Security apps like anti-virus, anti-malware
- Storage
- Database fees such as if you run your own membership
- Business cards, brochures
- Anything else you pay for each year that is required to run your business
Other Expenses That May Count Toward Lowering Your Tax Burden
- Cash donations, or monetary value of donations made
- Medical expenses paid out of pocket
How to Report Freelance Income or Online Business Income
If a client paid out more than $600 to you in one year, they should issue you a 1099 form that lists the following:
- Their company name
- Address
- Contact info
- Tax ID number (TIN)
You should make copies of the 1099 form they mail to you. Remit the original to the IRS and keep copies for your records.
Online Payments are Also Accounted for Using a 1099 Form
If you accept payments online using a service like PayPal or Stripe, keep an eye out for a 1099K form issued by these companies.
PayPal has a Tax Forms area of their site. If you earned enough in one tax year for them to remit this amount to the IRS, they will issue the form by late January, and add it to the Tax Forms area of your PayPal account for download.
For 2025 income tax reporting, if you were paid less than $20K from PayPal, you will not receive a 1099K but you should run reports, and remit to the IRS regardless.
Always Check the IRS Website for Yearly Updates and Changes Before Filing Your Taxes
Each year, the IRS can potentially make changes to how they tax freelancers and small business owners. Always do your due diligence, and read up on the latest on the official IRS website, IRS.gov
IRA Withdrawals Must be Reported
Unfortunately, the tough job market forced many writers, content managers, designers, techs and marketing professionals to withdraw from their retirement funds just to stay on top of living expenses.
If you withdrew from your retirement savings to cover bills and debt, you must report this on your federal tax return.
Your financial institution will have issued a 1099R form. Log in to download it or check the mail for a hard copy.
If you were smart, you designated a percent to withhold. In that case, you may not owe additional tax on this money.
Check with your accountant if you’re confused about how to report this or how it affects your tax liability.
Try to think of ways to make more in the coming year so you can put back what you withdrew and maybe even make a substantial contribution to your IRA in the coming months.
Take Advantage of Business Credits You May Qualify For from the IRS
The federal government develops programs to help business owners owe less at tax time by developing programs and ways of running their enterprise that benefit society and the planet. Some examples:
- Being a woman-owned, disabled or minority-owned business (indirect benefits — for example, you may qualify for exclusive federal or state business grants)
- Adding energy saving programs and practices such as solar power, alternative fuel and clean emissions vehicles
- Investing in low income communities
- Providing on site childcare for your employees
- Research and development of new products
- Rehabbing restored buildings
- Offering paid family leave
- Offering healthcare benefits to your workers through the SHOP marketplace
- Adding work opportunities for targeted groups such as veterans and SNAP recipients
Good to Know Tax Filing 2026
Unrelated to freelancing, seniors over 65 who earned income get a $6,000 tax credit thanks to Trump in 2026. Trump’s Big Beautiful Bill also offers the following perks to taxpayers:
- There is no tax on tip income through 2028
- Car loan interest is not taxed
- Overtime income is not taxed
Find more details on these and other tax related questions on the IRS website.