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Freelance Writing Tax Tips

Freelance Writing

Here’s a tidbit of information for freelance writers and small business owners. This information isn’t so much a tip on how to increase your writing speed or how to find new clients. It more has to do with the accounting end of the freelance writing business.

Most freelance writers are in the writing business to make a profit. Yes, there is a love for writing but ultimately most writers would love to be able to earn their keep through their writing. Fortunately, the government is doing its part to give freelance writers and small businesses a hand through tax code Section 179. Section 179 isn’t brand new and has gone through a few iterations (with more to come), but right now writers and small businesses can take advantage of it.

What is Section 179?

Section 179 is a tax deduction that not only benefits large businesses, but small business owners (including freelance writers) can take advantage of it also. It allows business owners to depreciate the value of newly purchased office equipment in one year rather than over a period of several years. This can prove to be quite a savings when it comes to purchasing office equipment and furniture.

General Rules to Section 179

As a freelance writer, you may not have to worry about reaching the $500,000 deduction limit placed on equipment or the $2,000,000 limit placed on equipment purchases. You might not even be able to take advantage of the $100% bonus depreciation on new equipment in excess of the $500,000, but you can ultimately save money on your freelance writing equipment this year.

The stipulation is that you purchase qualified equipment and put it into use during the 2011 calendar year. Qualified equipment includes, but is not limited to office equipment, office furniture, computer software, tangible personal property used in business and more.

Filing Form 4562Freelance Writing

Make sure to keep accurate records of when you purchase equipment and put it into use. You’ll need it when completing your annual tax forms. You can elect to take the Section 179 deduction when filing your tax forms. The 100% depreciation deduction is not automatic and you must file IRS Form 4562 to take advantage of it. Additionally, the deduction is taken on a ‘per item’ basis. Therefore, if there are some items you prefer to depreciate over several years, you can do so.

Tax preparation software for home/business such as TaxCut will ask you if you wish to take the deduction. If so, it will walk you step-by-step through the process. Fortunately, the software makes it easy for you to calculate your taxes without taking advantage of Section 179 and then with to see how much of a savings you’ll realize in one year.

Use it Or Lose It

Section 179 changes from year to year. If you don’t take advantage of it in 2011, it may change drastically in 2012. After all, in 2010 some small businesses took advantage of the “Hummer Tax Loophole” which allowed them to write off the purchase of large SUV’s. That loophole has been closed in 2011 by requiring vehicles purchased for business to have a gross vehicle weight of at least 6000 pounds.

You may think it’s a bit early to think about filing your 2011 taxes, but it’s not. With proper planning and wise purchasing decisions, you can get the right equipment to help catapult your freelance writing business and get a tax break while doing so. Think of it as doing your part to help stimulate the economy.

For more information on Section 179, visit Section 179.org.

About the author: Felicia A. Williams is a wife, mother, freelance writer and owner of Tidbits About Money.

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