Freelancers Can likely Deduct 20% of Business Income under new Tax Law
Beginning with the 2018 tax year, most freelance communication professionals will be able to deduct up to 20 percent of their net business income under the new tax law, Darlene L. Wilson, managing principal of Relay Accounting Management, told Alabama Media Professionals members at the group’s January meeting. Those operating pass-through entities, which include sole proprietorships, limited liability companies, partnerships and S-corporations, can likely take the deduction. Pass-through entities are so named because business income “passes through” to owners’ personal tax returns. Most freelancers structure their businesses as pass-through entities.
The full 20-percent deduction is limited to income of $157,500 (single filer) or $315,000 (joint return) for service businesses whose principal asset is the reputation or skill of one or more employees. This applies to most freelance businesses as well. “Nothing changes for people filing 2017 taxes in the next couple of months,” Wilson said. “The changes take effect with the 2018 taxes you will be filing in early 2019. There will be a lot of clarification to the new rules. We will continue to get updates throughout the year.”
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