Ask Stacy: I’m Self-Employed — How Will the New Tax Law Affect Me?

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Today’s question is about being self-employed; specifically, how it affects your income tax picture and how that picture has changed thanks to the new tax law.

I was basically self-employed for 10 years before I started Money Talks News, and that was 27 years ago. So, I know the pros and cons of working for yourself. If you’ve ever considered going it alone, the new tax law is going to become a good friend of yours. Here’s why.

For more information on this topic, check out “Ask Stacy: How Will the New Tax Law Affect Me?” and “6 Important Take-Aways From the Tax Reform Effort.” You can also go to the search at the top of this page, put in the word “taxes” and find plenty of information on just about anything you want to know.

Got a question of your own to ask? Scroll down past the transcript.

Don’t want to watch? Here’s what I said in the video

Stacy Johnson: Hello everyone, and welcome to your money Q&A question of the day. I’m your host, Stacy Johnson. This question is brought to you by MoneyTalksNews.com, the best in personal finance news since 1991.

Here’s today’s question. It’s from Paul. Paul says, “What’s the difference between working at a company and being a self-employed musician in terms of taxes? Will it be harder or easier to file taxes and due to the tax changes, how will I be effected by it?”

This is something I know a little bit about because I have been basically self-employed for 37 years. I’ve been working at home for about 25 of those. So, I’ve almost forgotten what it’s like to be an employee or to file a normal tax return.

Here are three things you need to know about this topic. First, when you’re self-employed, your taxes will be a little harder. Why is that? Well, because depending on what kind of company you have, you might have to file a separate tax return for your company. For example, I have a subchapter S company and I have to file a tax return for me and for that company.

Plus, you’re going to have to keep track of all your expenses to offset your income. That’s something a lot of employees don’t have to do. So, taxes can be a little bit more complicated.

Number two: Your taxes can also be a little more expensive. You’re going to have to pay all of your Social Security, for example. You’re also going to have to pay your taxes quarterly — they’re not being automatically taken out of your paychecks. You’re also not going to be getting a 401(k) match or have your health insurance paid by an employer. These things all make being self-employed more expensive.

That’s the bad stuff. What about the good stuff?

There’s never been a better time to be self-employed, thanks to the new tax law. Why? Because this year for the first time ever, many self-employed people can exclude up to 20 percent of their income from taxes. So, 20 percent of all the money I make is going to be tax-free. That’s a heck of a deal.

Sound good? Read a little bit more about being self-employed. We’ve got plenty of stuff at MoneyTalksNews.com.

That’s your question of the day. Now, here is your financial thought for the day. This one comes from Christopher Rice. Here it is:

“Every day is a bank account, and time is our currency. No one’s rich, no one’s poor. We’ve all got 24 hours each.”

Keep it in mind, folks, have a profitable day, and I’ll see you right here next time.

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About me

I founded Money Talks News in 1991. I’m a CPA, and have also earned licenses in stocks, commodities, options principal, mutual funds, life insurance, securities supervisor and real estate.

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