Are you aware you can rent out your home for tax-free income? That’s right—for freelancers, solopreneurs, and small business owners who love to travel, renting your property might be an excellent way to earn tax-free income.   

In this episode, Alex covers what the Augusta Rule is and how to take full advantage of renting your home for tax-free income, along with details about Section 280A.

In this episode, you’ll also hear:

• How the Master’s Golf Tournament changed short term rental rules 

• Tips for taking advantage of the Augusta Rule

• Potential benefits of Section 280A for small business owners

Must-listen moments: 

[00:00:37]  You need to know about the Augusta rule. This is the ability to potentially rent out your home for 14 days or less and not have to pay any income or tax on the rental income.

[00:04:08] Go on Airbnb, look at local rentals, look at hotels, figure out what's a reasonable rate you could charge on your home per night. Create the supporting documentation you need, particularly if you are going to rent out your home in a seasonal time, or where there's excessive demand for that period of time.

[00:05:55] If you are a small business owner, this rule can get even more lucrative for you. If you haven't talked to your tax professional team about some strategies of renting your home back to yourself in ways that align well with your business, i.e. doing things like board meetings, strategy sessions, offsite retreats at your home, this is something you need to talk to your team about.

For more details on financial topics curated just for freelancers, visit www.freelancefinancefix.com

You’re also invited to connect with me on LinkedIn at https://www.linkedin.com/in/alexmlynch/

Have you noticed more banks enticing you with higher rates? Higher rates generally mean higher savings but there’s no guarantee to how long this seemingly win/win situation will actually last.

In this episode, Alex shares why banks are offering high rates and why you should review your long term financial goals before making any changes to your current investments.   

In this episode, you’ll also hear:

• Why banks are pushing longer term investment offers

• Inflation as a benchmark for financial planning 

• Long-term power of compounding and equity market’s growth

Must-listen moments: 

[00:02:56] They didn't suddenly decide you are their favorite customer and they want to reward you. They made a business decision and just like every other business, you need to evaluate them and make sure their products are competitive for you and your situation.

[00:03:55] To create real wealth, we need to grow our wealth by more than the inflation rate. If our accounts are growing less than the inflation rate, we are losing what is called purchasing power.

[00:08:51] If you haven't recently, it's time to review your banking relationship and where you have your money market funds to make sure that you're getting a competitive rate of interest as well. 

For more detail on financial topics curated just for freelancers, visit www.freelancefinancefix.com

You’re also invited to connect with me on LinkedIn at https://www.linkedin.com/in/alexmlynch/

Our last episode, “Are You Maximizing Your Home Office Deductions?”, focused on home office deductions and details about Form 8829 Expenses for Business Use of Your Home. Be sure to review IRS Publication 587 and make sure you're using the most advantageous calculation when determining the business use percentage of your home.   

In this episode, Alex answers the most common questions about home office deductions to ensure your claim is as legitimate as possible.  

In this episode, you’ll also hear:

• Which spaces in your home qualify for deductions  

• Storage use and exclusive use by business 

• Tips for supporting your home office deduction claim  

Must-listen moments: 

[00:03:57] Every home is different and your home's unique layout can give you some advantages or disadvantages when it comes to calculating the home office deduction and percentage of home used for business purposes.

[00:06:24] A great reminder and best practice involving the home office deduction is to take photos of all of the areas you are claiming as a deduction…and if you do store goods anywhere else, take photos of those with clearly marked tape outlining the area for business use.

[00:09:26] You can switch back and forth between the simplified method of calculating the deduction as well as it may make sense in some years and not in others…you are not locked into any method.

For more detail on financial topics curated just for freelancers, visit www.freelancefinancefix.com

You’re also invited to connect with me on LinkedIn at https://www.linkedin.com/in/alexmlynch/

Although the April tax deadline has passed, now is a great time to review your return to ensure you’re maximizing your home office deductions. 

In this episode, Alex dives into home office deductions, different ways to compute your home office use, and what to know about Form 8829 Expenses for Business Use of Your Home.

In this episode, you’ll also hear:

• What constitutes a business use area in the home 

• Gross square footage and usable square footage calculations 

• Getting the most out of your home office deduction

Must-listen moments: 

[00:01:46] Based on a certain calculation, you are able to allocate a share of some of your home expenses, like utilities, repairs, mortgage interest, homeowner's insurance, your property taxes, and several other expenses related to your home, against your business's income.

[00:04:21] There are several other ways you can perform a business use calculation…potentially the most simple of them all is where you simply total up the number of bedrooms or rooms in your house and divide it by the number of rooms used exclusively for your business.

[00:10:18]  If you have never dived further into this calculation, it can be a worthwhile use of your time, particularly if you plan to stay in your residence for a multi-year period…getting the highest deduction year after year can put extra money in your pocket.

For more detail on financial topics curated just for freelancers, visit www.freelancefinancefix.com

You’re also invited to connect with me on LinkedIn at https://www.linkedin.com/in/alexmlynch/

Our previous episode, “A Freelancer’s Guide to Quarterly Tax Payments,” covered the basics of estimated tax payments and avoiding underpayment penalties.

In this episode, Alex discusses safe harbor provisions and determining your estimated tax payment. Be sure to check out Publication 505 by the IRS to learn more about estimated tax withholdings and safe harbor provisions.

In this episode, you’ll also hear:

• Benefits of safe harbor provisions for non-W2 income earners

• 90% accuracy for estimated payments and paying 110% of prior year taxes

• Pro-tips for making estimated payments as a freelancer or small business owner

Must-listen moments:

[00:01:12] There are what are called safe harbor provisions within the tax code that, as long as they are satisfied, you won't owe a tax penalty for underpayment of your taxes.

[00:04:21] Look at last year's tax return and how much tax in total you owed. Then multiply it by 27.5% and pay that amount as an estimated quarterly tax payment to the IRS every quarter.

[00:06:08] If you're a freelancer, solopreneur, or small business owner experiencing massive growth in your business, I suggest hiring a bookkeeper or tax preparer to take care of these estimated tax payments for you.

In hopes you explore the safe harbor provisions fully, find relief in these safe harbor explanations, and focus on increasing your revenue in alignment with your goals.

For more detail on financial topics curated just for freelancers, visit www.freelancefinancefix.com

You’re also invited to connect with me on LinkedIn at https://www.linkedin.com/in/alexmlynch/

You might be mistaken if you’re a small business owner or freelancer and think you only have to pay the IRS once a year. Estimated tax payments only apply in certain states, so review your local tax laws to avoid any penalty.  

In this episode, Alex breaks down what estimated tax payments are, who has to pay them, and how to pay them on time, and shares some insight to keep clear of paying the IRS more than is absolutely necessary. 

In this episode, you’ll also hear:

• Avoiding underpayment penalties  

• Pay-as-you-go tax and how taxes are remitted to the IRS

• Who must pay quarterly tax payments  

Must-listen moments: 

[00:03:50] …in the United States, we have a pay-as-you-go tax. What that means is when you make money or have taxable income, you are expected to remit the payments to the IRS as quickly as physically possible.

[00:04:39] An estimated tax payment is the process you go through every quarter to remit your estimated tax bill to the IRS based on how much revenue you earned and your estimated adjusted gross income.

[00:09:58] Making these estimated tax payments particularly applies to small business owners and freelancers.

For more detail on financial topics curated just for freelancers, visit www.freelancefinancefix.com

You’re also invited to connect with me on LinkedIn at https://www.linkedin.com/in/alexmlynch/

Our prior episode, “529 Plans are for More than Education” highlighted that the traditional 529 College Savings plans are set for big changes. While 529 accounts used to be where parents and grandparents invested money to fund the next generation's higher-level education costs like tuition, the Secure Act 2.0 includes provisions that if unused, this money can be rolled into a beneficiary’s Roth IRA. There are restrictions and rules that must be followed, but listen to the Freelance Finance Fix Episode 13 for all of the details. 

In this episode, Alex addresses 8 of the most common 529 plan questions and answers and shares why 529 accounts are becoming more popular. If you’re wondering about 529 plan beneficiary rules, age limits, how 529 savings affects financial aid, and whether you must use your state’s 529 plan, you’re in the right place!

Among other things, this 529 Account Q&A session covers:

• Flexible beneficiary options and 529 account ownership 

• Option for multiple 529 accounts for the same beneficiary

• Investment options, income tax cap, and improvements of 529 accounts  

Must-listen moments: 

[00:03:04] The 529 account is the property of the account owner, not the beneficiary.

[00:05:57] A single beneficiary can have multiple 529 accounts opened in their name, and each of these plans can potentially have a different account owner.

[00:13:03] If you do have a 529 account, I encourage you to take a peek at the investments inside of them, particularly in light of a very volatile market last year, and make sure the investments are in line with the beneficiary's goals and time of when they may be needing to use the funds.

For more detail on financial topics curated just for freelancers, visit www.freelancefinancefix.com

You’re also invited to connect with me on LinkedIn at https://www.linkedin.com/in/alexmlynch/

Traditionally, 529 accounts have been an option in which savings could be accumulated and invested toward the purpose of funding a loved one’s education expenses. Money can be set aside in the 529 plan as a lump sum or over time, invested in the markets, and grow tax free.

The real beauty and benefit of a 529 education savings plan is typically realized when the beneficiary uses the money and all its tax-free growth on qualified education expenses. But now, thanks to new legislation, the savings and growth from this investment can potentially be rolled into a Roth account.  

In this episode, Alex sheds light on updates to how 529 savings can be used for expenses other than education per the Secure 2.0 legislation. 

In this episode, you’ll also hear:

• Tax benefits of a 529 account 

• Understanding what qualifies as an education expense 

• Why a Roth IRA option is a game changer 

Must-listen moments: 

[00:02:18] A 529 account is a college education savings account where you can set aside some money, whether in a lump sum or over time, to a plan for future education expenses for a beneficiary.

[00:05:00] The fees inside of the 529 plan should be very low or non-existent for opening and closing of them, along with maintenance of them.

[00:08:38] Starting in 2024, there will be the ability after the 529 account has been opened with the same beneficiary for more than 15 years to roll over some of, or potentially all of it, to a Roth account.

For more detail on financial topics curated just for freelancers, visit www.freelancefinancefix.com

You’re also invited to connect with me on LinkedIn at https://www.linkedin.com/in/alexmlynch/