Your Money, Your Future
Your Money, Your Future

Yes, you can be a freelancer and make a livable wage

If you want to be your own boss and earn a successful living, go be a freelance software developer.

Those were the findings from a recent report by CareerCast. The job search website analyzed job data for the "gig"economy, including wages and projected growth, from the U.S. Bureau of Labor Statistics.

About a third of American workers are earning pay outside of a traditional employer relationship, according to the BLS. That adds up to roughly 53 million people.

Of course, not all freelance posts lead to a windfall for entrepreneurs. You might be in luck if you come from an information technology background. CareerCast has ranked the 10 best gigs for this year.

What to expect

Tech-based gigs are in high demand from a range of potential clients.

"If you're a software or web developer, some work might come from the finance sector and other work might come from education," said Kyle Kensing, online content editor at CareerCast.

Indeed, developers command higher pay compared to other contract workers. See below.

Expect a steep learning curve once you snag the gig, too. "With a 9-to-5, you can learn on the job," said Kensing.

"But at a place that hires on a contract basis," he said, "there's an understanding that you're an expert and can do the job quickly and efficiently."

Before you punch out

If you're planning on stepping out of your regular 9-to-5 grind, prepare to do a considerable amount of recordkeeping.

Once you leave your employer, you'll be responsible for tracking your expenses and income to ensure your tax planning goes smoothly.

The burden of paying self-employment taxes — the levies that go toward Social Security and Medicare — will fall on your shoulders alone.

In addition, you're also responsible for paying federal and state income taxes every quarter. Failure to pay those could lead to penalties.

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Nevertheless, freelancers have a bevy of tax-planning opportunities awaiting them, largely stemming from the deductibility of business expenses.

Work-related travel, for instance, is deductible, as are the contributions you make to a retirement plan you set up for yourself.

While you're responsible for buying your own health insurance, you can also deduct those premiums.

Bear in mind that you'll have to juggle these retirement savings and health insurance responsibilities while hustling for contracts, said Kensing.

It's best to work with a tax professional to ensure your deductions aren't egregious and that your estimated payments are made on time.

"There's a lot of abuse in this area, where people overdo it and deduct too much," said Gavin Morrissey, managing partner at Financial Strategy Associates in Needham, Massachusetts.

"If you go from a W-2 employee to setting up an office, as soon as you start taking the home office deduction, you go into a different level of scrutiny by the IRS," he said.