Understand How Freelance Income Is Taxed
When you work as a freelancer, you're generally considered self-employed. Instead of receiving a W-2 with taxes withheld, you receive 1099-NEC forms (or track payments yourself) and report your business income and expenses on Schedule C of your Form 1040.
As a freelancer you typically pay:
- Federal income tax
- State and local income tax (where applicable)
- Self-employment tax (Social Security and Medicare)
Track All Income from Clients
You're required to report all income, whether or not you receive a 1099-NEC. That includes payments from:
- Clients that issue 1099-NEC forms
- Clients that don't meet the $600 reporting threshold
- Online platforms (marketplaces, apps, etc.)
The safest approach is to maintain your own income log: invoices, platform reports, and bank statements. At year end, your total should be equal to or higher than the total from all 1099-NEC forms combined.
Understand Estimated Quarterly Taxes
Because no one is withholding taxes from your freelance income, the IRS expects you to make estimated tax payments during the year. If you wait until April to pay everything, you may owe penalties.
Many freelancers set aside 25–30% of each payment in a separate savings account and use that to make quarterly payments. You can use Form 1040-ES or work with a tax professional to calculate an appropriate amount.
Deductible Business Expenses
One advantage of freelancing is that you can deduct ordinary and necessary business expenses on Schedule C. Common examples include:
- Software subscriptions and online tools
- Home office expenses (for a dedicated workspace)
- Computer, phone, and equipment used for work
- Internet and phone bills (business portion)
- Professional services (accountants, lawyers)
- Advertising, marketing, and website costs
Keep receipts and documentation for every expense. If you claim a deduction, you should be able to show how it relates to your business.
Using Paystubs as a Freelancer
Even though you don't get traditional paystubs as a freelancer, many lenders and landlords still ask for "recent paystubs" as proof of income. That's where professional paystub generators can help.
With MakePaystubPro you can convert your actual freelance income into clean, standardized paystubs that show:
- Client name or your business name as employer
- Your name and address as employee
- Pay period dates matching your actual income
- Year-to-date totals that match your bookkeeping
These paystubs don't replace tax documents, but they present your income in a format that banks, landlords, and underwriters immediately understand.
To generate paystubs from your freelance income, start with our guide Paystubs for Freelancers and then create your first paystub in just a few minutes.