Can you tell me more about how tax law would get in the way? Self-employed can take a "home office" deduction on their taxes. Full time workers can as well, but its slightly more complicated.
You should maybe ask your accountant why you couldn't deduct, then? I know there are conditions, but this is one of the better-known self-employment deductions.
But if you're self-employed (or operate a business that's a sole proprietorship) you can deduct your expenses (equipment, rent on your home office, etc.) from your taxable income. In the U.S., you attach "Schedule C" to your federal tax return to do this:
you can't deduct home costs unless you want to get visited by the IRS. If you are running your own business it's fairly easy, if you're working for someone else as a direct employee DON'T DO IT. you will get audited and have to pay those taxes and penalties if you're lucky and don't get charged with tax fraud. It's not worth it. If you need to set up something expensive make your employer buy it (new computer you are borrowing, laptop, audio equipment, whatever) and give it back to them when you quit/get fired/done with it.
However, self employed workers can write off work related expenses. This may help offset the higher taxes. On the other hand, as a freelance web developer, my overhead is so low I don't even bother with deductions (I'm living in the Philippines to take advantage of the freedom of self employment but costs are super low here.)
The employer might not but the IRS might if you claim it as a home office expense. If more people work from home and beef up their home offices to accommodate that, there will be tax implications for that. When I was freelancing from home years ago, I never bothered (all I needed for work was email and a red pencil), but today it would be different.
If you are self-employed in the US, you pay an additional tax before you even start your regular taxes, and this tax isn't affected by your personal deductions.
You also need to pay for your own computers, SAAS services you use, etc. The more you make, the less this becomes an issue.
Say whaaat? You must not be based in the USA then. Owning your own business means EVERYTHING is a tax write-off. I mean everything. Food you spend on lunch, your home office space, anything you spend money on during the course of doing business. All of it is a tax write-off.
You do not get any of those write-offs if you work a corporate gig. If your income is the same in both cases, you will pay significantly less tax as a freelancer.
I feel like I addressed that pretty clearly, as that number takes into account healthcare and paid vacation and sick time. You do pay a self-employment tax, but I think that's made up for by the numerous deductions including home office that can be made. I work from home so it doesn't cost me any more for office space / cleaning / utilities, in fact, as mentioned, I get to deduct a percentage of all those things! I also no longer commute or have to order / eat lunch out, so that's a significant monthly savings as well.
Also, since my stated goals were to work less and take more vacation, the flexibility advantages you mention for an employer are precisely the flexibility advantages for ME that I was looking for! I love the ability to, every 4-8 weeks when a contract is done, decide how long to take off before the next one if I'd like to, or decide which project to pursue next.
I don't want to be sitting bored in an office getting paid because they bought my time "in bulk", like I've done before. If you find that an enjoyable way to spend your finite amount of time alive, that's honestly great as you'll likely face less obstacles, but it wasn't for me.
If you're legitimately self-employed (see second paragraph), you should be able to deduct all your business expenses - home office, hardware, software, phone, travel, advertising, legal fees, etc. - on your Schedule C. You can also set up a self-employment retirement plan (SEPP IRA) and contribute to it.[1] You'll need good records in case the IRS questions your expenses, and you'll need to keep your work life separate from your private life (e.g., your home office space must be used solely for work; if you use your car for both business and personal trips, you'll need to log your business mileage).
I'm assuming your work is legitimate self-employment, i.e., the people who pay you do not control your hours, tell you how or where to do your job, etc. If that's not the case, the law probably considers you an employee rather than an independent contractor[2], and you should be paid as one (W-2) - and you could get in trouble if you try to deduct expenses that are only valid for an independent contractor.
(I'm assuming you're self-employed, not incorporated.)
reply