Designer & Architect Business Tax Tips 2024
If becoming a self-employed home design professional is a new venture for you, making the switch to self-employment requires a mental shift in many ways, not the least of which is your relationship with finances.
If you’re a seasoned pro, you know that business finances are part of the gig.
Either way, we’re going to take a top-level overview of self-employment finances and taxes - the basic nuts and bolts: tax forms, requirements, timeframes, and common self-employment deductions.
I definitely recommend working with a tax professional. If a tax pro finds things you’ve overlooked, they may actually save you money! My opinion - it’s money well spent regardless between the time you save and the peace of mind.
This is by no means a complete list of self-employment tax information and write-offs, but it does give you a starting point if you’re filing US taxes as a self-employed interior designer, architect, landscape designer/architect etc.
Remember, none of the information in this post is considered legal or financial advice. I’m not a tax professional nor do I have any desire to be one. 😉
Tax Forms for Self-Employed Interior Designers
Self Employment Taxes
Income Tax & Estimated Quarterly Taxes
Extensions
Underpayment Penalties
Self-Employment Deductions
If going from W-2 employee to self employed is a recent switch for you, it’s an adjustment. I’ve been doing it for so long now I don’t even think about it (other than the fact that I have to stay on top of the books).
It can be daunting at first, but once you get a system down, you’ll be less stressed knowing your accounting is in order. Call me crazy - but once I get going I kind of get into it and find it satisfying.
No matter what, don’t despair - as a self-employed person, you get many tax breaks that your employed friends don’t.
Tax Forms for U.S. Self-Employed Designers & Architects
Here are the most common tax forms for small business self employment. I included this section because I know when I see these, they sort of go in one eyeball and out the other (don’t mind mixing metaphors), so talking about what the different forms are about is one more step towards financial/entrepreneurial fluency.
1099-NEC
1099-NEC stands for “Non-Employee Compensation”. Since 2020, the 1099-NEC form is for all independent contractor income.
If you were self-employed last year and provided services to a business that were worth at least $600, you may have received Form 1099-NEC. Typically, if you are paid as a freelancer, independent contractor or as a non-employee of a third party business, you will receive a 1099-NEC form.
The key here is this is business to business. You would not receive Form 1099-NEC if you provided design services to someone not in a trade or business. So interior design client work for a homeowner would not require the client to issue a 1099-NEC, but if the client were a business and you were paid more than $600, that business would issue a 1099-NEC.
Also, if you received income exceeding $600 from affiliates (like LTK/Reward Style or the Amazon affiliate program), ad networks, and other companies such as a sponsored post for a home décor brand, those organizations will need to issue you a 1099-NEC.
1099-MISC
Prior to the 2020 tax year, the IRS required nonemployee compensation to be reported via Form 1099-MISC. It used to be the main way self-employed designers and bloggers had income reported from business client work, affiliates, ad networks, and other companies they received earnings from if the contractor made more than $600 over the tax year. I mention this mainly because you may run into a reference to this on an older blog post about self-employment reporting.
Without getting into the weeds, suffice to say that in 2020, non-employee compensation was removed from that form and replaced by the 1099-NEC as discussed above.
The 1099-MISC is now reserved for payments that fall outside of contractor or freelancer wages, such as rent, attorneys’ fees, prize awards, and some healthcare costs paid by a business.
1099-K
The 1099-K form is used to report payment card and third party network transactions. Online payment processors such as Stripe or Paypal will send you this form, but only if you made more than $20,000 during the last tax year from that particular processor.
I advocate that your client payment system should all be automated through a CRM software such as Dubsado or Honeybook so that clients are automatically invoiced at certain milestones and they pay via a payment processor such as Stripe. Also, if you provide digital products as part of your business model, you’ll be relying on payment processors. (Setting this up in Squarespace is a snap.)
Self Employment Taxes
You usually must pay self-employment tax if you had net earnings from self-employment of $400 or more as of 2024.
The current self-employment tax rate is 15.3% as of 2024. 12.4% goes to social security and 2.9% goes to Medicare. If you work for yourself, you pay this self-employment tax instead of having an employer withhold Social Security and Medicare taxes from your paycheck.
Fortunately, you can deduct the employer-equivalent portion of your self-employed design business tax when determining your Adjusted Gross Income (AGI) to pay your income taxes. (More on this later.)
Income Tax & Estimated Quarterly Taxes
If you earn $1,000 or more on untaxed income, you’ll need to pay estimated quarterly taxes. To file income taxes, you’ll need to fill out Form 1040, and then pay estimated quarterly federal and state taxes during the year.
The Federal quarterly tax deadlines are as follows:
April 15
June 15
September 15
January 15 of the following year
Most states also require you to pay estimated quarterly taxes (unless you’re fortunate enough to live in a state with no income tax). Most also likely follow the same payment schedule, but if you happen to reside in California like me, ours is a little different:
April 15
June 15
January 15 of the following year
When Arnold Schwarzenegger was California’s governor, he terminated the September payment. (#sorrynotsorry)
This means your pay more in April and June since it’s only 3 periods instead of 4. According to my CPA, it was devised as a strategy to accelerate California’s cash flow. (Does the world’s 5th largest economy with a budget surplus really need to accelerate cash flow? But I digress.)
Here are links to some states’ Estimated Tax guides:
When filing your taxes for the year, you’ll need to fill out the Schedule SE form and the standard income tax Form 1040.
At least when it comes to payment time, it’s easy with IRS Direct Pay. (Californians can pay their state taxes here.)
Read over the IRS official guide to Estimated Taxes for further info.
Extensions
If you just can’t get it done in time, any taxpayer can get a six-month extension to file their federal IRS returns. However, that doesn’t delay your payments.
You can file an extension for your taxes by submitting Form 4868 with the IRS. Anyone can get an automatic extension - you don’t have to justify why. However, it must be done before the last day for filing taxes.
If you don’t file either your tax return or Form 4868 by the tax filing deadline, you’ll be subject to a late filing penalty. The penalty is usually 5% of the amount you owe for each month, up to a maximum of 25%. (H&R Block)
Some states offer automatic six-month extensions to all taxpayers (Alabama, California, and Wisconsin are three that do), but others require you to fill out a form on or before your return’s original due date.
Estimated Tax Underpayment Penalties
The law requires most employees and self-employed business owners to pay at least 90% of their taxes before the April due date. Again, this happens automatically when you’re a W-2 employee.
Failure to pay 90% might incur a late payment penalty. The penalty is usually half of 1% of the amount owed for each month, up to a maximum of 25%. (H&R Block)
As a self-employed designer, this means you have to forecast what you think your income will be for the upcoming year. Not easy under the best of circumstances.
Using last year’s income as a predictor is only as helpful as the current year’s resemblance to last year’s business model. Never mind outside forces beyond the realm of predictability or control.
In addition, it also means that even if you typically earn more in say Q3 as people spruce up their living spaces and purchase furniture in anticipation of the holidays, you still have to pay equal amounts throughout the year.
Interior Design Business Self-Employment Tax Deductions
One of the benefits of being self-employed (besides being your own boss, setting your own schedule, and charting your own destiny!) is that it gives you access to tax incentives not available to W-2 workers. Here are some common write-offs you’ll want to take advantage of:
Self Employment Tax Deduction
Remember above where we discussed the self employment tax? Well it’s not quite as bad as it seems. You actually get to deduct half of your self employment tax from your net income when calculating your income tax. The IRS treats the employer portion of the self-employment tax as a business expense and allows you to deduct it accordingly.
Home Office Expenses
To write off a home office area, it needs to be an area that is used regularly and exclusively for business purposes. Unfortunately this means a kitchen table won't qualify. If you have a dedicated home office space, you can deduct a portion of your home expenses such as maintenance, utilities, insurance premiums, rent, mortgage interest and real estate taxes.
There’s also a simplified deduction where you calculate the square footage of your dedicated home office space and get a deduction based off of that for up to 300 square feet.
Subscriptions and Memberships
Sketchup & AutoCAD software, Squarespace website hosting, ASID membership: subscriptions and memberships used in the course of business are deductible for self-employed workers. Allowable deductions include dues to professional organizations, subscriptions to trade publications, software licensing and digital subscription services, among other things. Again, check with a tax professional.
Trade memberships
Business related subscriptions from Canva Pro to Squarespace to TurboTax
Website domain name hosting
*Depending on your accounting method, the cost of your website and branding design can be written off in the year they were acquired or amortized over time.
Tools & Templates
Need a new website? Your beautiful new interior design website will not only convert visitors into clients, but it’s also deductible! (shameless plug here :)
Other marketing templates and tools? Yep, those are deductible too.
Continuing Education
Taking a course on SEO for interior designers and architects? How about a course on SketchUp or AutoCAD for interior designers?
You can deduct expenses for work-related education on your business tax return as a self-employed business owner. The education must meet one of two requirements:
It's required by law to keep your present salary, status, or job - like Continuing Education credits or units for professionals in specific fields
It's necessary to maintain or improve skills needed in your present work (this is a much broader scope than the first one)
Office Supplies
Your favorite notebooks, containers or binders to keep samples and project info organized, printer paper, ink, and other office supplies used over the course of a year can be written off at tax time - be sure to keep a record of your receipts.
Depreciation
Bigger items like computers, phones, printers or plotters, a car, etc. are often considered capital expenditures. You can deduct major items like these over several years if purchased for use in your business.
Interior Design Business Travel & Meals
Planning to go to High Point Market this year? You can deduct a portion of your expenses!
Flights, hotels, Uber fees, and food are deductible business expenses as long as they're for actual, legitimate business purposes.
Some other possible write-off categories include:
Retirement plan contributions deductions
Health care premiums
Business insurance deduction
Interest deductions - business loans, credit cards etc.
Rent for office space
Business car lease
Vehicle use deduction
The rules for all business deductions are complex - see IRS Publication 535 for information and details.
Filing your taxes is never a favorite to-do, but it does feel good once it’s done. Again, I highly recommend consulting a tax professional. If they find items you have overlooked in your interior or architecture design business, they can pay for themselves, never mind the time they will save you along so you can get back to design work.
Other business-building posts you’ll love:
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