Maximize Tax Deductions For Freelancers

The QBI (Qualified Business Income) deduction rewards strategy. It's not about luck. It's not about last-minute scrambling. It's not reactive tax filing. Instead, it rewards intentional planning. ❌ No structure = lost deductions ❌ No timing = missed leverage ❌ No coordination = higher taxes Because here’s the reality: QBI isn’t automatic. It’s earned through how you invest, pay, structure, and plan. What’s the key to getting this right? 💙 Clean structure protects eligibility 💙 Early planning multiplies deductions 💙 Smart reinvestment compounds tax efficiency Here’s how to maximize QBI with strategic investments: 1/ Invest in business assets – Equipment purchases increase qualified income 2/ Time capital spending – Bonus depreciation accelerates deductions 3/ Optimize W-2 wages – Reasonable pay unlocks higher QBI limits 4/ Use retirement contributions – Lower taxable income while preserving QBI 5/ Structure real estate correctly – Certain rentals can qualify as a trade or business 6/ Separate high-income services – Entity structuring protects eligibility 7/ Track deductible expenses precisely – Clean books = maximum qualified income 8/ Reinvest profits strategically – Strong reinvestment strengthens deduction outcomes 9/ Avoid income spikes – Smoothing income prevents phaseouts 10/ Review entity type annually – LLC vs S-Corp vs partnership matters 11/ Coordinate personal + business taxes – One plan beats siloed decisions 12/ Work with a pro before year-end – QBI rewards planning, not December panic So, remember: QBI isn’t a loophole. It’s a reward for disciplined planning. Plan early. Structure intentionally. Review before December, not after. Which QBI strategy will you commit to this year to maximize your results? Follow me Marc Henn for more. We want to help you Retire Early, Supercharge Your Cash Flow, and Minimize Taxes. Marc Henn is a licensed Investment Adviser with Harvest Financial Advisors, a registered entity with the U. S. Securities and Exchange Commission.

Powerful strategy for solopreneurs: - Start an LLC - Grow and Become an S Corporation: This can provide significant tax advantages by allowing you to split your income between salary and distributions, potentially reducing your overall tax liability. But make sure to optimize the qualified business income deduction - Pay Yourself a Reasonable Salary: As an S Corp owner, pay yourself a reasonable salary that reflects the market rate for your role. This salary is subject to payroll taxes, but any additional profits can be taken as distributions, which are not subject to self-employment tax. - Add a Solo 401(k) and Max It Out: Establish a Solo 401(k) plan to take advantage of tax-deferred retirement savings. As both the employer and employee, you can contribute up to the maximum allowable limit, significantly boosting your retirement savings while reducing your taxable income. But make sure your salary is not too low, it will impact what can go in here - Employ Your Spouse: If your spouse can perform meaningful work for your business, employ them and pay a fair salary. - Max Out Solo 401(k) for Spouse: By employing your spouse, you can also contribute to their Solo 401(k) plan, further increasing your family's retirement savings and reducing your taxable income - Backdoor Roth IRA for Each: Utilize the backdoor Roth IRA strategy for both you and your spouse. This involves making non-deductible contributions to a traditional IRA and then converting those funds to a Roth IRA, allowing for tax-free growth and withdrawals in retirement - Maximize Qualified Business Income Deduction (QBID): Take full advantage of the Qualified Business Income Deduction (QBID), which allows eligible S Corp owners to deduct up to 20% of their qualified business income (or lesser of that and 50% of w2 wages). This can significantly reduce your taxable income and increase your overall tax savings. - If salary is too low to max solo 401(k), then do mega backdoor Roth 401(K) to the $69,000 limit Implementing these strategies can help solopreneurs optimize their financial planning, reduce tax liabilities, and build substantial retirement savings

If you're not leveraging these tax strategies, you're leaving money on the table. Here are 7 that you need to look into: #1 - Home Office Deduction - Deduct $5 per sq ft (up to 300 sq ft) - Must be EXCLUSIVELY for business - Take photos as proof – the IRS loves to scrutinize this And if you store inventory at home? You can deduct that space WITHOUT the strict exclusive use test. Requirements: - You sell products at wholesale or retail - Your home is the only fixed business location - You use the space regularly #2 - Toolkit Deductions Every tool you use is a potential deduction: - Internet and cell phone (pro-rated for business use) - Video conferencing services - Website hosting and domain fees - Plugins, apps, and software - Online services (QuickBooks, Zapier, etc.) #3 - Travel Like a Boss, Deduct Like a Pro - $0.67 per mile for business travel (2024) - 50% of meals and entertainment (keep those receipts!) - 100% of lodging for overnight business trips #4 - The Contractor Advantage Hired freelancers? Deduct their fees, but beware: - Collect W-9 forms - Issue 1099-NECs for payments over $600 - Don't misclassify employees as contractors (IRS red flag) #5 - Startup Costs (First-Year Goldmine) - Deduct up to $5,000 in startup costs - Another $5,000 for organizational costs (Includes market research, advertising, legal fees) #6 - The QBI Deduction (Your 20% Ace in the Hole) You qualify for a 20% deduction on your business income if: - You have a pass-through business - Meet certain income thresholds #7 - The Retirement Plan Power Play Solo 401(k) strategy: - Contribute up to 25% of income, max $66k (2024) - Reduce taxable income dollar-for-dollar - Go Roth for tax-free growth Real-world example: Sarah, 28, in eCom, made $150k in 2022. She maxed out her Solo 401(k) with $37,500. This cut her taxable income by 25% and set up a tax-free growth machine. And if Sarah invests that $37,500 annually for 30 years with an 8% return, she'll have over $4 million – potentially all tax-free if she took advantage of a Roth IRA! Smart tax planning isn't just about saving money today. It's about building a financial fortress for your future.

A friend reached out after years of watching my content He's got a one-person business that will make $600K+ this year in a high-tax state (California). If he doesn't do anything he'll have to pay a tax bill of ~260K+ between federal, state, and self-employment taxes Here's what I told him we could do to save 60K+ in taxes this year alone (I charge $3K for services, think this is a good trade?): 1 - Elect S Corp. By electing S corp status he only pays self-employment taxes (payroll) on a reasonable salary instead of the full $600K. Example: $150K salary and $450K in distributions saves about $19.5K in taxes. Every. Single. Year. 2 - Maximize the QBI deduction. We don't want the lowest possible reasonable salary (many people get this wrong) since it reduces our qualified business income deduction. We also don't want a salary that is too high or we'll pay too much in payroll tax. The goal is to find the sweet spot. Example: $60K salary means a $30K QBI deduction instead of a $75K deduction on a $150K salary. Big difference. Plus the low salary limits how much he can put into a retirement plan 3 - Solo 401K. This is an easy one and I talk about it a lot. Up to a $70K tax deduction for 2025 and if he gets married he can put his spouse on payroll and she can also participate in the same solo 401K plan. Up to a $140K tax deduction or $140K/year into a plan. If he wants even more in deductions a defined benefit plan could also be set up 4 - Pay CA state income taxes through the business. If he pays state taxes on his personal return, he is limited to a $10K tax deduction because of the SALT cap. But with a Pass-Through Entity Tax (PTET) election the business can pay state taxes at the entity level and the entire amount is deductible on the federal return. About $54K which is an $18,900 tax federal savings. Not bad 5 - Track expenses and keep good books. It's not about being perfect here but bad books = wasted money. Put all business-related stuff on a business card and ideally rack up points for money already being spent. Travel to/from conferences, meals when applicable, home office deduction, etc Some other things he could look at that add up: - Backdoor Roth - Mega backdoor Roth with the solo 401K plan after all deductible contributions have been used - HSA - Hire kids to spread the wealth and do custodial Roths - 529 plans, minimal but some to get up to the $35K # if they don't go to college - Automate the rest of his plan

April 15th is right around the corner are your taxes ready? I've learned the value of strategic tax planning though many failures in the ABA Business world. Here are my top 10 tax tips to make sure you're prepared and maximizing your benefits this season: Max Out Retirement Contributions: Increase your contributions to IRA or 401(k) accounts to reduce your taxable income. Leverage Business Deductions: Remember, business expenses like travel, technology, and home office setups can significantly lower your taxable income. Charitable Contributions: Don’t forget to itemize your charitable donations, this benefits great causes and reduces your tax burden. Health Savings Accounts (HSA): Contributing to an HSA can decrease taxable income and help cover medical expenses tax-free. Estimated Payments: Avoid underpayment penalties by ensuring you’ve made adequate quarterly estimated tax payments. Organize Your Documents: Accurate record-keeping throughout the year makes deductions simpler and audits less stressful. Qualified Business Income (QBI): Maximize the QBI deduction (up to 20%) available for pass-through businesses like LLCs and S Corps. Tax Credits: Explore tax credits available for hiring, research and development, renewable energy, and education. Plan Ahead for Next Year: Immediately after filing, strategize for next year, adjust withholding, review entity structure, and anticipate major expenses. Tax season doesn’t have to be taxing. What’s your go-to strategy for making tax season work for your business? #TaxPlanning #Entrepreneurship #FinancialStrategy #BusinessOwnerTips

Wrapping up my Tips for Solopreneurs series with some HUGE financial tips for US based freelancers. This assumes you are filing as S-Corp (see previous post). 1️⃣ Payroll: You become a W2 employee of your business. This means you need to run payroll. Some accountants will handle this for you, but I've found it cheapest and easiest to use a professional payroll service like Gusto. They will file quarterly tax filings for you, no extra charge! Running payroll every two weeks instead of quarterly (most accountants will do quarterly, less work for them), allows you to budget 401K savings evenly throughout the year. 2️⃣ 401K: Perhaps the hugest financial benefit to being a solopreneur is what you can do with your 401K savings. Your business can match up to 25% of your annual salary. (Per previous post, you set your salary at a fraction of what you plan on making, so this is NOT 25% of your revenue). Let's use a salary of $75,000 for example: Any US employee can save $23,500 as an individual. (regardless of your salary) Your business can match $18,750 for a total of $42,250 401K savings in one year. This entire $42K reduces your profit for the year, lowering your tax burden. Now you see why I said to run payroll every 2 weeks instead of quarterly! 3️⃣ More stuff on payroll... Spread your projected annual tax burden for the year across your 26 paychecks. After taxes and 401K savings my bi-weekly paycheck is a measly $300 or something. But this means I'm always about even on taxes at the end of the year (I never owe extra). 4️⃣ Set up recurring bi-weekly distributions. (This is the money you live off of). The bulk of your living expenses are covered by "distributions", not your paycheck! Figure out what you need to cover your monthly spending, and set up recurring payments to yourself for that amount. --- Of course this implies your going to have stable revenue to support this much savings and scheduled money moving. If you follow what I mentioned in my first post, it guarantees this stable revenue for you. (Partner with a consulting firm or recruiter, then eventually learn how to gain direct clients.) --- Finally, you need a good community of people to support you on your journey. Technical Freelancer Academy is a community of like minded solopreneurs. You can always hit me up for advice there! 🥂

How you can turn everyday expenses into tax savings? (If you’re a small business owner, read this) I spent 24 hours testing how much of my life I could legally write off. Here’s what happened. When I started, I made one rule: - Spend money ONLY if it qualifies as a deduction. - Eat ONLY if it’s deductible. - Travel ONLY if it’s deductible. Sounds simple, right? But it wasn’t. → The IRS has strict rules: Ordinary: Common in your line of work. Necessary: Essential for business operations. Here’s what I learned. My home office. I worked from my second room, which doubles as my office. - That space qualifies as a tax-deductible expense. My commute. I traveled 4.4 miles to a co-working space for a meeting. - Deduction: $2.94 (4.4 miles × $0.67/mile). → Fun fact: Driving 10 miles/day = $2,445/year in tax deductions. My workspace. At the co-working space, I paid $500/month. What did I get? - Meeting rooms. - Networking opportunities. - A gym. ↳ Fully deductible as a business expense. My lunch. I had lunch with a business partner. - Cost: $50.70. - Deduction: $25.35 (50% under IRS meal rules). My tools. I rely on tools to keep my business running: - MacBook Pro: 100% deductible under IRS Section 179. - Phone: Deductible for business use. - Accessories: Mouse, work glasses, monitor. → Pro Tip: Year-end purchases reduce your tax liability. When you run a business, many costs can work in your favor: - The tools you use. - The meals you enjoy. - The spaces you work in. You just need to know how to optimize. I hope this helps you in 2025. Repost to help others ♻️

My client cracked $100,000 in revenue in his business. It saved him $28,000 in tax. My client is having a phenomenal year in business: (He runs a software consultancy) → Sole owner, no employees. → This is his side hustle, he also has a W2. → In business since 2020, broke $100,000 for the first time. He's making enough money that his CPA told him to file taxes as an S-Corp. But didn't explain why. Lucky for me, It was the reason why my client started working with my team. Here's how we educated him to make the right decision, and turbocharged his tax planning for years to come. 1. LLC → S-Corp. → A S-Corp saves him money on self-employment taxes by paying himself a reasonable salary and payroll taxes on the rest. → An immediate 15.3% savings in retained profits. 2. Employed his wife. → For similar reasons as above, employing your spouse can help decrease your tax bill. → More money kept within the family, a tax deduction for the business. 3. Maximized his deductions. → Along with his wife's salary, they can write off more travel, meals, and home expenses that weren't included before. 4. Enhanced Retirement planning. → Maximizing their Solo 401(k). ($69,000 for 2024) → Leveraging 7702(a) for tax exempt income in retirement. Results: → That's $75,000 in deferred taxes. (which will save them $28,000 in taxes owed this year) This clear outline explained what steps we took, and how much $ that would save him. It was a no brainer. Don't let the lack of planning be the reason your business isn't successful.

You’re not overworked, you’re overtaxed. Most small business owners give back 20–35% because they file reactively instead of strategically. Here’s how to keep more and reinvest smarter: 1. Maximize your deductions ↳ Track every ordinary, necessary expense with an app and categorize monthly. 2. Use the home office deduction ↳ Exclusive, regular use qualifies; document footage, utilities, and claims. 3. Pay quarterlies on time ↳ Automate estimates to avoid penalties and smooth cash flow. 4. Revisit your entity ↳ Consider S-Corp salary + distributions; review annually as you scale. 5. Deploy advanced breaks ↳ Cost segregation, bonus depreciation, and passive loss rules with expert guidance. 6. Leverage real estate ↳ Combine cash flow with depreciation and 1031 deferrals to compound. 7. Get a Tax Savings Assessment ↳ Reveal missed write-offs, better structures, and a reinvestment plan at IILIFE.live/tax-savings When you operate with a strategy: 📍 You cut tax drag and protect margins 📍 You convert savings into income-producing assets 📍 You accelerate toward financial independence 💬 What’s the one tax move you’ll implement this quarter? 🏦 If you’re tired of “wasting” $250K+ in taxes and want to turn that money into a $5M+ real estate portfolio, take our Tax Savings Assessment: https://lnkd.in/gkeSB68X Enjoy this? ♻️ Repost, follow Ravi Katta and check out the link in bio for more content and resources on building legacy wealth.

$800K Sole Proprietor? Here’s How to Cut That $200K Tax Bill You’re running a business, netting $800K+ with minimal expenses. You’re also writing a $200K+ check to the IRS and state. Ouch. How do we fix this? 1️⃣ Convert to an S-Corp As a sole proprietor, all your net income is subject to self-employment tax (15.3%) With an S-Corp, you split income into: ✅ Salary (subject to payroll taxes) ✅ Distributions (not subject to self-employment tax) Optimizing salary (typically ~30% of net income) ensures you maximize the QBI deduction 2️⃣ Maximize the QBI Deduction If you make over $450K-$500K, you phase out of the 20% Qualified Business Income (QBI) deduction The solution? Pay yourself enough salary (~30% of net income) to fully claim the deduction Example: $1M Net Income $300K Salary $700K Pass-through Income $140K QBI deduction (20% of $700K) 3️⃣ Use the Pass-Through Entity Tax (PTET) Workaround States like NJ & NY allow S-Corps & Partnerships to pay state taxes at the entity level Why? The federal SALT deduction cap ($10K) limits personal state tax deductions PTET allows a full deduction at the federal level, reducing taxable income 4️⃣ Additional Tax Strategies Accountable Plan → Reimburse yourself for home office, auto, and other business expenses tax-free The Augusta Rule → Rent your home to your business up to 14 days per year, tax-free Retirement Contributions → Max out a Solo 401(k) or Cash Balance Plan Is an S-Corp Right for You? If you’re a solo owner or have a trusted spouse/partner, an S-Corp is usually a great move If you need flexible profit sharing, a Partnership (1065) may be better Final Thought: If you’re making $800K+ as a sole prop, the right tax strategy could save you six figures. Doing nothing? That’s costing you. Want to optimize your tax bill? Let’s talk. #SCORP #QBI #PTET #SOLEPROP