Easy ways to bring in income have become more appealing for anyone stunted financially by inflation’s effects these past four years. So much so, that a slight decline in traditional investing (via the stock market) has begun to occur.
Where are people turning to get that easy cash flow? Apparently, some are betting on whether or not the Chiefs are going to have a 3-peat this year (and other sports bets)… at least according to this recent study.
See, back in 2018, the Supreme Court decided to overturn the federal law that made sports betting illegal. Since then, over 32 states have legalized it. And with the introduction of sports betting apps like FanDuel and DraftKings, it’s finger-tip accessible.
But, whether or not this is a good option for you and your house, is what the study brings into question. The allure of a quick win could position you poorly, according to the study.
As your Paducah tax person, I want to remind you that if you do decide to place bets on who will win the World Series this year, keep in mind that your winnings are considered income and therefore taxable. Losses can be claimed in some cases, but they can’t exceed the amount of winnings.
Remember to keep careful track of your wins and losses here. It will matter come filing time.
While betting isn’t an ideal way to make secure cash, making better money in this economy is a priority. Not to mention the desire for a more flexible work life.
Enter self-employment in the gig economy.
If you’ve been considering the self-employment route, there are a lot of tax advantages to doing that you couldn’t take as an employee. And they could be better for your wallet (or at least your tax burden) if you’re smart…
Self-Employment Tax Advantages for Paducah 4 Types of Gig Workers
“The only way to do great work is to love what you do.” – Steve Jobs
Self-employment is appealing to a lot of people right now thanks to its job flexibility and growth potential. By choosing a gig economy job, you can take control of your career and work on your own terms. And there are a lot of gig economy jobs out there that offer a lot of appeal if self-employment is the route you want to take: freelancing, driving for a rideshare company, creating content online, etc.
One of the best parts (and the part a lot of people fail to consider with gig work) is the fact that you can leverage the tax code to your advantage. Let’s take a look by examining some specific gig economy jobs and tax strategies for them.
Freelance Writers and Editors: The home office deduction can be a game-changer for freelance writing and editing. If you dedicate a room or a section of your home as a workspace used solely for writing or editing, you can deduct part of your rent/mortgage, utilities, and even home insurance. This is based on a relative percentage. For example, if your home office takes up 10 percent of your house, you can deduct 10 percent of your housing expenses.
If you buy a new laptop at a 1,500 price tag, you can deduct it as a business expense under section 179 (hold onto your receipt).
Rideshare and Delivery Drivers: If you’re driving for Uber, Lyft, or delivering groceries through InstaCart, your vehicle can be your biggest asset and tax deduction. The standard mileage deduction is 65.5 cents per mile in 2023 (increasing to 67 cents in 2024), so if you’re driving 20k miles a year, that’s 13,100 dollars off your taxable income. Most drivers find this method adds up quickly, especially when logging 1k to 1.5k miles a week. Make sure to keep detailed mileage records with a tracker app to maximize your deductions.
If you’ve bought a vehicle specifically for this line of work, you can also consider Section 179. This allows you to deduct a significant portion of your vehicle’s cost in the first year: up to 20,200 for a light vehicle, and up to 80 percent of the purchase price, capped at 28,900 for heavier vehicles.
But keep in mind that you can’t use Section 179 and the standard mileage deduction on the same vehicle in the same year. Also, over 50 percent of your vehicle’s use must be for business.
Creatives and Content Creators: If you decide to become an influencer, YouTuber, blogger, or photographer, your gear can be deducted. This includes cameras, lighting, and software you use to do your work. Spend 5k on gear this year—that’s 5k off your taxable income.
And don’t forget internet and phone expenses. If you’re using them for work, part of those bills can be deducted too. Promote your content online? Those social media ads and website hosting fees? Deductible as well.
Coaches, Consultants, and Educators: Professional development isn’t just good for business—it’s a tax break. Whether it’s webinars, books, or courses, those costs are deductible.
Meeting clients? Hosting workshops? Meals and travel expenses for business purposes are deductible too — up to 50 percent on meals and fully on travel expenses as long as they are for business and not personal reasons. This is especially where you want to hold onto receipts.
Other self-employment things to consider:
- No matter what you do, automating your records is crucial. Use an app to track income, expenses, and mileage—this will save you headaches later.
- Consider your business entity from the start. A lot of people form LLCs because they’re simple and offer protection. But making your gig business an S-Corp can help you save on self-employment taxes. For example, paying yourself a reasonable salary and taking the rest as dividends can lower your tax bill.
- Remember to estimate your tax burden and then make your quarterly tax payments on time. If you expect to owe 12k in taxes, paying 3k each quarter keeps you in good standing with the IRS and avoids penalties.
- Maximize your retirement contributions to reduce your taxable income amount.
Unlike W-2 work, gig work is exciting because you can leverage the tax code to your advantage from the comfort of your McCracken County home. We can help you with the self-employment tax stuff and figuring out strategies specific to your chosen line of work. Get something scheduled if you want to get started. More so if you’re already in gig work and haven’t even thought about taxes:
Make smart financial decisions,
Dean Owen
