Everything You Should Know about How TCJA Will Impact Taxes for Independent Contractors

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. There are over 57 million freelancers in the United States and will become more than 50 percent of the workforce by 2027. There will be an acceleration of the freelance positions which are already on the rise after the passage of the TCJA. This article is going to provide you with more information about how freelance workers are impacted by the Tax Cuts and Job Act.

The effect of TCJA on each income bracket is that it lowers the tax rates. With the TCJA, you will realize that you will pay less money to the tax authorities. For example, a person who was earning $100,000 had a tax rate of 28{890298a957967c63b4b61a1013456c80f9c1c209c7ed277ca0a53fd14e8e170d} but now it is going to be 24{890298a957967c63b4b61a1013456c80f9c1c209c7ed277ca0a53fd14e8e170d}. Also, the TCJA helps freelancers to deduct more from their taxable income. When the taxable income is reduced, the lower tax rates will be applied and results to a tax benefit 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. In most cases, freelancers or independent contractors are not recognized as official workers of a business. Freelancers are independent and therefore do not have the traditional boss-employee relationship. Freelancers only enter into a contractual relationship with customers who are looking to fill a service need. 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. 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. Due to the changes in taxes for independent contractors, is going to be a growth in this industry. If you want to discover more about the impact of Tax Cuts and Job Act on the independent workers community, ensure that you click here.