The rollercoaster ride of the Trump Administration has bludgeoned our senses, but we have to talk taxes.
It’s always fun to squint at 11th-hour chicken scratch written on a life-impacting bill (by people who didn’t even bother to read the original text) to try to determine what it means for you.
In short, the new tax bill is a net positive for most freelancers and the self-employed. It’s nice when something like that happens. Before we get into it, the standard caveat applies: this is for entertainment value only; get real advice from a real lawyer or accountant.
As this Time article states, freelancers can take advantage of a pass-through deduction.
The new benefit, which allows taxpayers to shave their taxable income by roughly one-fifth, applies to so-called “pass-through” (or business) income, starting in 2018.
The new benefit is designed to apply to “pass-through” business income. That doesn’t include dividends and interests if you own investments like stocks and bonds. But it does include partnerships, S corporations, and sole proprietorships — the default status you assume when you work for yourself.
The new benefit takes the form of a deduction, allowing you lop 20% off the income you report to the IRS. You are eligible even if you take the standard deduction — which, in another plus for middle-class taxpayers, was doubled to $12,000 from $6,500 for single filers ($24,000 from $13,000 for couples).
Newsweek posits that this change (which is set to expire in 2025) could expedite the drive towards more freelancers in the market. I’m skeptical of that – people leaping off of a tax change, but something we’ll monitor.
Of course, few things are all-encompassingly good. The repeal of the individual mandate could lead to health care price increases, so make sure you keep an eye on that.
Despite the pass-through tax deduction, the healthcare situation could lead Americans to think twice before leaving their nine-to-five gigs to pursue freelance work.