Updated for tax year 2023.
You’ve recently launched a thriving graphic design business — but have you thought about filing your taxes as a freelance graphic designer? Here are some tax-saving tips to keep in mind as you prepare for tax season.
Freelancer tax deductions explained
As an independent contractor or freelancer, you might be able to lower your taxable income by claiming certain business expenses as write-offs on your annual tax return. You would report that information on Schedule C (Form 1040), Profit or Loss from Business.
According to the Internal Revenue Service (IRS), your activity qualifies as a business if your primary purpose is to generate business income or profit. You also must be involved in your venture with “continuity and regularity.” A hobby or sporadic activity is not a business, and while hobby income is still taxed, hobby expenses cannot be deducted on your tax return.
Deductible expenses are those that are ordinary and necessary for your business. The IRS defines an ordinary expense as common and accepted in your graphic design trade or business. An expense is necessary if it is helpful and appropriate for your trade or business. It also does not have to be indispensable to be considered necessary.
When claiming expenses for your income tax return, make sure they are directly related to your graphic design business as a sole proprietor and not for some other business you might operate or for your personal use.
Is my computer deductible as a graphic designer?
The most obvious and probably expensive tool you need for graphic design work is your computer. Fortunately, you can claim it as a deductible business expense along with other office expenses like monitors, printers and other necessary hardware. The total cost of the item is tax-deductible as long as you use it exclusively for business purposes. Your deduction is limited to the business use percentage if you also use the item for personal use.
When it comes time to file your return, you can deduct these items in one of two ways. You can choose the depreciation method, where you spread the deduction out over several tax years, or you can write off the entire cost of the item in the year you purchased it.
Other deductible graphic design supplies
There are several graphic designer business expenses you can deduct for your freelance business to reduce your tax bill at tax time:
- Website hosting fees
- Business cards
- Cloud storage
- Email accounts
- Fonts, graphics and templates
- Courses, classes and training
- Paid ads and analytics programs on social media
- Design software
- Other software subscriptions
- Client resource management tools
- Project management software
General business expenses
Graphic design business owners usually have some of the same general expenses as other business owners. Some examples are:
- Payment processing fees
- Legal and other professional services
- Business licenses and registration fees
- Office supplies and postage
- Business insurance
Business use of your home (home office deduction)
If you work at a home office rather than a commercial studio, you may deduct some home-related expenses — including a percentage of utility costs like your cell phone and internet bills. The square footage of your home office determines your deductible percentage of these costs. You can calculate and report home office costs on Form 8829, Expenses for Business Use of Your Home.
Alternatively, you can also use the simplified method to calculate the business use of your home. Using this method, you simply deduct a flat $5 per square foot, up to 300 square feet.
The importance of recordkeeping
The most important aspect of filing taxes as a freelance graphic designer is keeping complete and orderly records of all your business income and expenses. Good recordkeeping will make completing your annual income tax returns much easier.
You don’t have to get fancy with your recordkeeping, either. A simple spreadsheet documenting all business activity will suffice. Just make sure it includes all business purchases, dates of expenses, business use, time spent completing a task or job and any revenue earned.
When claiming tax write-offs for your freelance design business, keeping a log of receipts, invoices and any other documentation to back up your purchases is critical. Having that information on hand will help you if the IRS has questions about your tax return.