An increasing number of millennials are embracing the gig economy — the term used to refer to the labor market defined by short-term contracts and freelance work.
Nearly 50 percent of millennial workers have already become freelancers, according to the annual Freelancing in America study by Upwork and Freelancers Union. Examples of this significant workforce including freelance journalists, contractors, Uber and Lyft drivers and Airbnb hosts. What’s more, research from NASDAQ shows that 43 percent of the American workforce is expected to work as freelance or contract workers by 2020.
So, as an advisor to this growing freelance workforce population, the question remains, how will you help them benefit from the 2017 tax reform legislation?
2018 Opportunities with 2017 Tax Legislation
The newly enacted federal tax legislation presents great opportunities this year for freelance workers, since one of the most significant changes incorporated in the new legislation was to reduce the corporate tax rate from the current 35 percent rate to 21 percent in 2018. Unlike large corporations that are taxed at a flat rate, most small businesses, and freelancers, are structured as “pass-through” entities; as a result, the profits from the business flows through to the business owner’s personal tax return and are taxed at ordinary 2018 income tax rates.
While pass-through income will continue to be taxed at ordinary income tax rates, under new tax provisions many freelancers will be eligible to deduct 20 percent of their “qualified business income” (QBI) starting this year. In other words, in 2018 certain freelancers properly utilizing pass-through entities will only be taxed on 80 percent of their pass-through income.
About Tim Speiss
Timothy Speiss is the Partner-in-Charge of the firm’s Personal Wealth Advisors Group and Vice President of EisnerAmper Wealth Planning LLC. Tim has more than 30 years of experience in providing comprehensive tax planning and related investment, compensation, and financial planning services to senior executives and board members of Fortune 100 publicly held companies, Forbes 400 families, and privately held businesses and owners including celebrities and owners of professional sports teams. Tim is a frequent speaker and author on topics of tax and financial planning, executive compensation, charitable giving, and related matters. He has lectured in various university graduate programs and regularly provides commentary on tax, investment and legislative matters to television, radio, and print media, including CNBC, Bloomberg and Forbes.