[Economics] TurboTax Guide to Self-Employment Taxes in Today's Gig Economy

[FazzNoth]

Many Americans have recently found themselves joining the gig economy as either a self-employed individual, a freelancer, or a similar short-term worker. If you fall into one of these categories, you are likely wondering how self-employment tax is handled compared with what you've done before. Here, we'll help you feel confident in your understanding of taxes when you're self-employed.

Get every dollar you deserve with unlimited tax advice from experts who know self-employment taxes inside and out. Whether you're a freelancer, independent contractor, small business owner, or have multiple streams of income, TurboTax Self-Employed can help you uncover the industry-specific deductions you qualify for.

 

What is the gig economy?
A gig economy is a job market where many workers hold short-term jobs or contracts, typically working for different companies or individuals rather than longer-term, permanent jobs with one company. There are many reasons why workers might start working a "gig," but common reasons include the desire to earn more money with a side job, to be their own boss, or the loss of a more permanent job.

Gig jobs span a wide range of skills and wage ranges. If you're a gig economy worker, you may have one of the following jobs:

• Consultant
• Handyperson
• Freelancer
• Delivery driver or rideshare
• Airbnb owner
• Tutor
• Photographer
• Fitness trainer
• Online seller

How does working for myself affect my taxes?

Individuals working in the gig economy will still pay traditional income taxes. However, if you make over $400 per year from your work as a self-employed worker, then you also need to pay self-employment tax. This tax includes Social Security and Medicare tax and is calculated on Schedule SE and filed with your Form 1040. This amount is also reported on Schedule 2, Line 4 of your Form 1040.

The good news is that you can deduct half of the amount you pay in self-employment tax from your income on your Form 1040. For example, $2,000 in self-employment tax reduces your taxable income by $1,000. In the 22% tax bracket, that would mean an income tax savings of $220.

More Info: https://www.msn.com/en-us/money/personalfinance/turbotax-guide-to-self-employment-taxes-in-todays-gig-economy/ar-AAWgkCT?ocid=BingNewsSearch