Is TaxACT Free? A Complete Breakdown of Plans and Hidden Fees

Maximize Deductions with TaxACT: Tips for Freelancers and Small Business OwnersFiling taxes as a freelancer or small business owner can feel like navigating a maze: receipts everywhere, multiple income streams, and the constant question of which expenses are deductible. TaxACT is a popular, budget-friendly tax-preparation tool that supports self-employed filers and small-business returns. This article walks through practical strategies to maximize deductions when using TaxACT, reduce your tax bill legally, and avoid common mistakes that trigger audits.

Why deductions matter for freelancers and small businesses

Freelancers and small-business owners pay both income tax and self-employment tax (Social Security and Medicare). Deductions reduce taxable income, which lowers both income tax and, in many cases, the self-employment tax base. Properly claimed deductions can significantly improve your after-tax cash flow and let you reinvest more into your business.

Key deduction categories to track

• Home office

  • Qualifying space: must be used regularly and exclusively for business.
  • Two methods: simplified deduction (standard rate per square foot) or actual expenses (portion of rent/mortgage interest, utilities, insurance, repairs).
  • Keep floor plans, photos, and a clear allocation method in case of audit.

• Vehicle and travel

  • Standard mileage vs. actual vehicle expenses (gas, repairs, depreciation, insurance). Choose the method that yields the larger deduction but be consistent once you pick actual expenses and depreciation.
  • Deduct business-related travel, lodging, and 50% of business meal costs (subject to specific IRS rules).
  • Maintain a mileage log or use an app and save receipts.

• Equipment and supplies

  • Office equipment (computers, printers), tools, and supplies used for business.
  • Section 179 and bonus depreciation may allow you to expense significant purchases in the year of acquisition—TaxACT supports entering Section 179 and depreciation details.

• Professional services and fees

  • Legal, accounting, bookkeeping, and contractor fees are deductible.
  • Subscription services, cloud software, and industry-specific memberships qualify.

• Marketing and advertising

  • Website costs, online ads, business cards, promotional materials, and event sponsorships are valid business expenses.

• Insurance and retirement contributions

  • Business insurance, health insurance premiums (when eligible), and contributions to SEP-IRA, Solo 401(k), or SIMPLE IRA reduce taxable income or provide tax-deferred growth.

• Education and training

  • Courses, certifications, conferences, and reference materials that maintain or improve skills related to your business are deductible.

• Rent and utilities

  • Rent for office space, storage units, and utilities used in the business are deductible. Keep leases and invoices.

• Interest and bank fees

  • Business loan interest, credit card interest on business purchases, and bank fees tied to your business accounts.

Using TaxACT effectively to capture deductions

• Choose the correct product

  • TaxACT offers tiers; self-employed filers should choose the Self-Employed or Business product that supports Schedule C, Schedule SE, and depreciation entries. Using the wrong product can lead to missed forms and deductions.

• Use guided interviews thoroughly

  • Answer prompts carefully. TaxACT’s interview asks about income types, expenses, and asset purchases—provide complete answers to surface relevant deductions.

• Enter income sources separately

  • Break down 1099s, other income, and business receipts. Accurate categorization helps TaxACT suggest appropriate deduction categories.

• Take advantage of the Schedule C and Schedule SE walkthroughs

  • TaxACT provides dedicated sections for business expenses and self-employment tax calculations—use them to ensure all applicable deductions are entered.

• Use the depreciation and Section 179 wizards

  • When you buy equipment, walk through TaxACT’s depreciation and Section 179 entries to determine whether expensing or depreciating yields the best tax outcome.

• Review built-in error checks

  • TaxACT flags missing information and common mistakes. Resolve flagged items before filing to reduce the chance of an audit or reject.

Practical recordkeeping habits

• Digitize receipts

  • Scan or photograph receipts and organize them by category and date. TaxACT accepts some uploaded documents for record-keeping; maintain originals or reliable digital copies.

• Maintain separate accounts

  • Use separate bank and credit card accounts for business spending to simplify tracking and auditing.

• Keep a mileage log

  • Note date, purpose, start/end mileage, and miles driven for each business trip. If audited, IRS expects contemporaneous records.

• Reconcile monthly

  • Match bank statements to income and expense records monthly to catch missed deductions early.

• Keep backup documentation

  • Contracts, invoices, appointment schedules, and communications that substantiate business use are essential.

Specific strategies to maximize deductions legally

• Choose the correct home office method annually

  • Compare the simplified method vs. actual expenses each year. Although the simplified method is easier, actual expenses might provide a larger deduction if you have high housing costs.

• Time large purchases

  • If you expect higher income this year, delaying or accelerating equipment purchases can change your tax bracket or deduction timing. Use Section 179 to expense purchases in the year bought if it helps reduce taxable income.

• Hire family members

  • Employing a spouse or child in legitimate roles can shift income to lower tax brackets and permit retirement account contributions.

• Use retirement plans strategically

  • Maximize SEP-IRA or Solo 401(k) contributions to reduce taxable income and save for retirement. TaxACT includes tools to calculate contribution limits and impacts.

• Keep business meal records detailed

  • For 50% deductible meals (and the 100% temporary rule applies in some cases for restaurant meals, check current IRS guidance), record who attended, business purpose, and receipts.

• Deduct startup costs correctly

  • Up to a certain limit can be expensed in year one; remaining costs amortized over 15 years. TaxACT supports startup expense entries—use the startup section.

Common pitfalls and how to avoid them

• Overstating home office or vehicle use

  • Exclusive-use requirement for home office is strict. For vehicles, pick rental vs. actual costs strategically and back it up with logs.

• Mixing personal and business expenses

  • Avoid personal purchases in business accounts. If they occur, reimburse the business and document reimbursements.

• Missing quarterly estimated payments

  • Freelancers should make estimated tax payments to avoid penalties. TaxACT estimates quarterly payments based on entered income—review and act on those figures.

• Ignoring state-specific rules

  • State tax rules for deductions, credits, and business filing differ. Use TaxACT’s state modules and check state-specific guidance.

• Forgetting to report all income

  • Underreporting income increases audit risk. Enter all 1099s, other income, and cash receipts.

Audit preparedness

• Keep records for at least three years (some items longer)

  • Most audit cycles look back three years; keep key documents for six years if you underreported income by more than 25%.

• Document business purpose

  • For deductions like travel and meals, keep notes about the business purpose and participants.

• Be consistent

  • Use consistent methods year-to-year for depreciation and major deduction categories; changes should be documented and justified.

• Respond promptly if audited

  • Provide organized documents and explanations. TaxACT’s help resources can guide needed forms and supporting schedules.

Example checklist before filing with TaxACT

• Confirm you picked the Self-Employed/Business product.
• Enter all income sources and 1099s.
• Enter expenses by category (home office, vehicle, supplies, marketing, etc.).
• Run depreciation and Section 179 entries for equipment.
• Enter retirement contributions and health insurance premiums.
• Review TaxACT’s error checks and warnings.
• Confirm quarterly estimates paid or plan to pay with Form 1040-ES.
• Back up all entries with digitized receipts and logs.

Quick tips summary

• Keep meticulous records (receipts, mileage logs, invoices).
• Compare home office methods each year to pick the better deduction.
• Use Section 179 for large purchases when beneficial.
• Max out retirement plan contributions available to self-employed filers.
• Separate business and personal finances to simplify deductions and audits.

Maximizing deductions requires careful recordkeeping, knowledge of available tax tools, and strategic timing. TaxACT provides the forms and guided interviews needed to capture most self-employment deductions—use its wizards, run the checks, and keep solid documentation to support your claims.