A Guide to Understanding How TCJA Affects Taxes for Independent Contractors
Today, the Tax Cuts and Jobs Act by the administration of Trump has taken effect and this is going to impact the taxes for independent contractors. There are over 57 million freelancers in the United States and will become more than 50 percent of the workforce by 2027. You’ll find that freelance positions are increasing with time and now with TCJA, the growth of freelance positions is going to be accelerated. In this article, you will discover more about how freelancers are affected by the Tax Cuts and Job Act.
With TCJA, you’re going to enjoy lower tax rates in each income bracket. With the TCJA, you will realize that you will pay less money to the tax authorities. For instance, you will pay a 24% tax rate if you earn $100,000 today which was previously 28%. In addition to the lower rates, TCJA also provides freelancers with an opportunity to reduce their taxable income. If the taxable income of independent contractors is deducted, lower tax rates are going to be applied which will provide benefits to them. You’ll find that for example if an independent contractor was earning about $45,000 each year, the changes in the tax code will help them to save up to $1000.
You will realize that the TCJA is going to be beneficial to a variety of people. Freelancers or independent contractors do not work for business officially. Since freelancers are independent, they do not conform to the old relationship between a boss and employee. Freelancers operates in terms of a contractual agreement with the clients that want to be helped in executing a certain service. Long time ago, the freelancers were mostly journalists and photographers. Also, you would find the independent contractors in the service industry in blue-collar jobs such as plumbing and carpentry. However, there is a shift in the freelance workforce which has been caused by the creation of gig workers that accepts work through mobile applications. Most of the independent workers are hired this way because it is easy to assign work and reduce the company’s overhead. The number of gig workers is expected to double in 2020 due to the rapid expansion of the gig workers community. Due to the changes in taxes for independent contractors, is going to be a growth in this industry. Be sure to check out this page if you want to find out more information about the impact of Tax Cuts and Job Act on independent workers.