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Here's How the

Gig Economy Works for Freelancers

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Understanding freelancing in the gig economy

Like anything in life, regular employment with a company has pluses and minuses. But maybe you've had enough of being at the whims of your company's work schedule. Maybe you enjoy the stability of having a regular paycheck, but you might be able to make more as a freelancer. If you're thinking about becoming your own boss, you'll want to be aware of how taxes work for self employed people, what the inner workings of the gig economy are and what your options are as a freelancer for things like health insurance, bank accounts and self employed retirement plans.

Table of contents

Key Takeaways:...Read more

What is the gig economy?...Read more

What are gig jobs?...Read more

Why become a gig worker?...Read more

What does the gig economy offer?...Read more

Key Takeaways:

Gig work is growing in popularity for several reasons
The gig economy is made up of a huge variety of work types
There are benefits to gig work that go beyond the financial

Throughout the mid-to-late 20th century, bands had gigs at the local nightclub, and musicians who made their living regularly playing music on local stages were known to be "gigging." Sometime in the 2000s, the word was repurposed for any short-term job performed for payment. In the past 5-10 years, as self-employment opportunities and freelancing opportunities boomed, the gig economy was born. In the public's imagination, "gig work" typically evokes images of hailing a rideshare service or ordering takeout food on a delivery app. But in reality, today's gig work has become so much more than that. More than a third of US workers participate in the gig economy, either for their primary or secondary job, and it may well be the future of the workforce in our country. With that in mind, here's what you should know if you're considering trying your hand in this growing space.

What is the gig economy?

There's no official gig economy definition, but if you've ever used a digital app to book a vacation rental, bought a homemade craft or ordered a pizza, you've probably taken part in this ever-expanding sector of the overall economy. When you see the term gig economy meaning a sector of the overall economy that uses a gig model, it's probably referring to the system where labor is exchanged for money between individuals or companies through digital platforms. This gig model matches providers of goods and services with customers, usually on a short-term basis and often involving payment per individual task. You might be asking, "How much taxes do I owe as a gig worker?" Well it all depends on how much income you make and your estimated quarterly taxes will be based on that.

What are gig jobs?

It's become clear that you don't have to work a 9-5 to make a decent living. And, there are more and more side hustle jobs, as they're sometimes called, that can become serious long-term careers. Gig workers no longer only include people working to make an extra buck on top of their main source of income.

Image shows Flyfin's main categories of gig work including asset sharing, professional services, transportation-based, household services, and handmade goods. No need to include additional keywords.

Gig economy jobs are also a stronger income stream for gig workers than the stereotypical pulling together weekend concert money or saving up for a summer trip. Some surveys show people can make upwards of $7,000 per month regularly. That kind of money goes towards saving to buy a home or pay off student loans. You might be asking yourself what kind of side hustle you could get into. But what exactly are some of the gig economy examples that are fueling side hustle growth? Creating interior decorating tutorials? Walking dogs? Those are part of it, but some of the most lucrative gig economy examples are some you might not have thought of before. Even as ride-sharing continues to grow in popularity, demand has kept the earning potential significantly high. Same with selling or renting property. But gig workers are also turning to fitness training, e-commerce, buying and reselling items online, and professions like photography and videography, tutoring and nannying are all growing parts of the gig economy.

Why become a gig worker?

There's no specific profile for gig workers. The appeal of working for yourself is universal, which is one reason it's growing. People choose to leave wage and salary work and migrate to the gig economy for all sorts of reasons, but they generally fall into several categories.

Image of FLYFIN with text highlighting reasons to enter the gig economy such as desire to work independently, convenience, supplemental income, and ease of finding work.

Some are free agents who want independence in their work and make most of their income as freelancers. Others are more casual about it, supplementing their primary income with freelance jobs. Still, others do it because it's the most convenient for their lifestyle, not because they don't want a 9-5 job. And some people simply need extra cash and can find side hustle jobs quickly and easily.

Quick tip

Track your expenses. If you do gig work, you can save a lot on taxes if you find every deduction.

What does the gig economy offer?

The benefits of the gig model are many. Some are obvious, but many workers don't realize other benefits until they're already firmly established as self-employed individuals.

Greater flexibility

Most people expect to have more control over their time with gig jobs, but this kind of work also offers more flexibility for businesses. Both gig workers and the average gig company can get the work done or get paid without a long-term commitment to each other. For gig workers, working smart to avoid inconsistent income can be a challenge, but juggling work and being able to prioritize personal interests is a big benefit.

More independence

The sense of freedom that freelancing can offer is sometimes just good for mental health. More importantly, self-employed people generally have more control over their lives, making it less of a challenge for people who have kids or a band to still have an income that supports them. This independence always means your in charge of paying your own taxes, both income taxes and self-employment taxes.

Better work-life balance

Modified Adjusted Gross Income

Modified Adjusted Gross Income (MAGI) can be found by adding back certain deductions to AGI. Use MAGI to check your eligibility for tax credits.