The U.S. government’s decision to overhaul the tax law has inadvertently provided certain benefits to independent contractors, such as Uber and Lyft drivers.
If you already work in the gig economy, you should seek bookkeeping services for independent contractors by the time you file your income taxes for 2018. Equinox Business Solutions notes that you may qualify for a 20% income tax cut prior to settling payment for new tax rates.
Aside from Uber and Lyft drivers, other qualified independent workers include IT consultants in Silicon Valley, stock brokers, and management consultants. Single Americans who earn less than $157,500 are qualified for the deduction, while married couples with an income of less than $315,000 are also eligible. The tax cuts may also be a reason more people will decide to transition from traditional employment to freelancing.
On Your Own
By 2020, the gig economy will comprise 7.6 million independent contractors, or 43% of the U.S. workforce. Howard Gleckman, Tax Policy Center senior fellow, partly attributed the growth to some people who are in the high-tax bracket. Others simply want to do freelance work because they have control over their time and schedule. However, there are drawbacks when you decide to work as an independent contractor.
Benefits, such as health insurance, will no longer be available. Last year, single health insurance’s average annual premium cost almost $6,700. As such, you would have paid this amount if you had decided to leave a 9-to-5 job, since you have no employer to cover most of the payment. Sick and vacation leaves will also be out of the picture, which means you earn nothing if you decide not to work on a certain day.
Freelancers and independent contractors have certain benefits, but you need to understand that this type of setup also has some disadvantages. If you feel that the benefits outweigh the risks and cons, then this type of job is perfect for you.