Taxes are an inevitable part of every American’s life, however, there are some extra steps when you’re self-employed. As a freelance artist, you need to file both state and federal taxes, as well as 1099 forms.
Taxes can get burdensome, and freelancers often overpay their taxes. However, there are several tax deductions available for self-employed artists — painters, makeup artists, illustrators, DJs, Etsy sellers, graphic designers, animators, and more. Some of the categories you can deduct include travel, meals, inventory, vehicle and transportation costs, equipment, art supplies, home studio expenses, legal and professional fees, health insurance, gallery costs & commissions, and more.
The home office deduction is one of the most valuable deductions available to freelancers.
For example, you can claim the home office deduction if you use a spare bedroom as a studio space. You can also apply for it if you use the spare room as a storage space for your art materials, paintings, and canvases.
According to the IRS, you can claim your art studio as a deduction as long as it’s used exclusively for your art business, and you can prove that's where you do most of your work. The deduction amount relies heavily upon how much of the house is devoted to your artistic work.
The home office deduction offers you a tax write-off for bills such as mortgage interest, rent, utilities, real estate taxes, maintenance, and repairs. These deductions can prove to be very valuable, depending on how much you pay for housing.
A percentage of your monthly rent is tax-deductible for every month you claim a home office expense.
You can write off the cost of insurance (home/renter/property insurance) that covers the business part of your home.
Typically, basic utilities like electricity, gas, water, and trash removal are personal expenses, but you can write off a portion of these costs if you have a home office.
Cleaning supplies, soap, toilet paper, and other necessities are partially tax-deductible.
Home office furniture
Any furniture that you bought for your workstation is fully tax-deductible since they’re used exclusively t for business activities.
Internet connection is a must if you are working from home. Thus, you can claim your Wi-Fi expenses on your taxes!
Just like the mortgage interest write-off, you can also deduct a portion of your real estate taxes.
If you happen to have a landline connection, a portion of it can be written off.
Home repairs and maintenance
Any sort of home office repairs can be written off. However, if you are renovating the home, then you’ll get a partial write-off.
The IRS offers two different methods to claim this write-off. One requires you to calculate your actual home office expenses and keep detailed records in case of an audit. You can apply for the deduction, but you must be prepared to defend it. This is known as the regular method. However, it isn’t always preferred by small business owners since it requires you to submit records calculating the square footage of your workspace.
On the other hand, the Simplified Method reduces the burden of recordkeeping by multiplying the square footage of your office with an IRS rate to determine the actual expenses. To qualify for the Simplified Method, your home office must not be larger than 300 square feet and you cannot deduct depreciation or home-related itemized deductions. So, if you have a small studio within your house, the simplified method might be a better choice for you.
Since tax laws can be complicated, a lot of taxpayers end up avoiding this deduction. Getting greedy with deduction numbers can also lead to an IRS audit. To avoid getting audited, freelance artists should carefully calculate their expenses and keep a record of all bills and receipts before claiming the tricky but extremely valuable home office deduction.
To calculate the accurate amount, you can use a tax engine like FlyFin. The app can help you perform the calculations and make the right decision for your home office since it is powered by AI and backed by CPAs whom you can consult to determine which method works best for you.