Due to the recent passage of the Tax Cuts and Jobs Act by the Trump administration, there will be an impact on the taxes for independent contractors. More than 57 million freelancers exist in the United States and will make up to 50 percent of the workforce by 2027. Freelance positions are on the rise and with the introduction of the TCJA, there has been an acceleration of the growth of freelance positions. By reading this article, you’ll learn more about how the Tax Cuts and Job Act affects freelancers.
It is important you know that TCJA lowers the tax rates in each income bracket. You will therefore have less money taken from you by the tax authorities due to the TCJA. For instance, you will pay a 24% tax rate if you earn $100,000 today which was previously 28%. Apart from the lower rates, TCJA is also going to enable freelancers reduce more from their taxable income. The advantage of the taxable income getting reduced is that the lower tax rates are going to be applied and this will provide benefits to independent contractors. 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.
There are many groups of people that are going to benefit from the TCJA. Freelancers or independent contractors do not work for business officially. There is no traditional boss-employee relationship freelancers because they are independent. When there is a service need, freelancers are going to be called upon to fill in through a contractual relationship. Long time ago, the freelancers were mostly journalists and photographers. In addition, the independent contractors were mainly in the service industry doing blue-collar jobs such as carpentry and plumbing. After the introduction of gig workers, there has been a shift in the freelance community since work is accepted through mobile apps. Most of the independent workers are hired this way because it is easy to assign work and reduce the company’s overhead. Between 15 and 2020, it is estimated that the number of gig workers is going to double due to the rapid increase in the number of gig workers. This industry therefore is going to experience a growth due to the changes in taxes for the independent contractors. To read more interesting articles about the effects of Tax Cuts and Job Act on independent workers, ensure that you visit this website.