Updated for tax year 2023.
Freelance tutoring can be a great way to earn some extra cash. Sometimes, it may even turn into a full-time income. But since being a freelancer means you are an independent contractor and not an employee of a company, it comes with its own tax implications. As a freelance tutor, the Internal Revenue Service (IRS) considers you to be a small business owner, and you must pay your taxes accordingly. To help you out, here are some freelancer tax tips to prepare you for filing taxes this year.
At a glance:
- Understanding your tax responsibilities as a freelance tutor is crucial for filing properly and avoiding penalties.
- Keep track of deductible business expenses and report them using Schedule C.
- For smoother tax filing, it’s important to maintain a detailed expense tracking system, consistently invoice clients and set aside income for quarterly taxes.
How to file taxes as a freelancer
While filing taxes as a freelancer is slightly more time-consuming than filing as an employee, tax time can be a breeze with the right tools and knowledge. You just have to remember to keep track of your business-related expenses to claim them as a tax deduction and reduce your taxable business income during tax season. You’ll do this by filing Schedule C with your personal income tax return. By claiming available freelancer tax deductions, you can lower your taxable income, reduce your tax liability and put more money back into your pocket.
Tax deductions for freelance tutors
Freelance tutors are eligible for a few special deductions. Tutors are essentially running mini classrooms and often have many unique expenses that come along with that. Fortunately, you can claim deductions for many of your tutoring expenses. Let’s review some of the top tax write-offs currently available to freelance tutors.
1. Office and school supplies
As a freelance tutor, you likely need various school supplies to teach and help your students effectively. The good news is that any office supplies or school supplies you purchased for your tutoring sessions are tax deductible.
Basic supplies, such as paper, pens and education software or subscriptions, are deductible if used directly for your business. Even larger expenses such as laptops, computers and advertising costs are tax deductible if used solely for work.
2. Your home office
If you run your tutoring business from a home office, you may be eligible to claim the home office deduction. You can also deduct the cost of a coworking office space if you work there instead of at home.
Along with your home office, you can deduct a portion of your phone bill and internet expenses, if applicable. Even if you use your internet and phone for personal use, you can deduct part of the cost as a business expense.
Another deduction related to your home office expenses you may overlook is office furniture. For instance, purchasing a chair or desk for your students is considered a necessary business expense and is generally tax deductible.
3. Union dues
If you’re a self-employed tutor who belongs to a freelancer’s union, you are more than likely required to pay union dues. Those dues help cover the cost of education, events and other activities provided to the union’s members. Since union dues are required for membership, the membership cost is considered a deductible expense because it’s necessary for the growth of your business. That includes any union initiation fees, too. Union dues and related fees can be fully deducted on Schedule C as a business expense on your tax return.
4. Travel expenses
As a tutor, you can deduct transportation expenses if you travel for business purposes. For example, if you met a client at a school or a library for your tutoring session, you could deduct the mileage to and from that appointment. To maintain an accurate record of your travel expenses and business trips, keep a running mileage log in your car or use a mobile app that calculates the miles as you drive.
5. Continuing education and seminars
To gain more skills or knowledge about the tutoring business or a teaching-related subject matter, you may consider continuing your education for professional development at some point. Whether that means taking a few classes, attending a webinar or traveling to an in-person seminar, the IRS acknowledges freelance tutors often pay those entry fees out of their own pockets. Because of that, these costs are deductible expenses. As always, keep all receipts to back up any tax deductions you claim.
6. Licensing
Launching your tutoring business usually requires you to obtain some type of licensing. Fortunately, you can deduct licensing fees on your tax return. Licensing deductions can include the cost of registering for a business license, insurance and website registration, among other fees.
For anyone who is required to take exams to license themselves as a professional, those related expenses are deductible as well. Any yearly fee or testing fee you pay to a licensing organization is deductible on your federal income tax return, too.
7. Athletic and musical equipment
Special equipment is typically a necessary part of your sessions if you provide tutoring services for music or sports. Instruments and sports equipment are generally tax-deductible. Depending on the type of equipment, it can either be depreciated over time or fully expensed in the year you purchased it. Equipment maintenance costs are also deductible, so don’t forget to keep the bill for those services.
More freelance tutor tax tips
As a freelance tutor, you are responsible for paying your self-employment tax and keeping track of business expenses. To make tax time more manageable, you can follow some general rules.
- Use the same invoice system for every client to keep track of all your income. Don’t forget to keep a record of your total earnings and what each separate client paid you.
- While it may be tempting to spend your income as soon as it comes in, you are responsible for paying estimated quarterly taxes as a freelancer. Set aside part of your monthly income to prepare for that payment every quarter. If you don’t make quarterly payments, you could be left with a large tax bill when you file your tax return, along with potential penalties.
- As you spend money on your tutoring business, create a system to track expenses. That includes all the materials, equipment, technology and mileage we mentioned above. Make sure to keep copies of all receipts from the date of purchase.
The bottom line
Organizing your freelancer finances from the start will save time and ensure you don’t forget to claim any deductible expenses when filing your taxes. And when you file with TaxAct®, our tax software can help you more easily understand your deductible expenses and help identify areas where you might be able to take advantage of certain tax breaks.