Did you know the IRS has an Instagram account? Their most recent post? “Follow us across social media for s’more IRS tips” with a (you guessed it) s’mores background.
No, not the most interesting marketing out there, but maybe worth hitting the follow button if you want tax deadline reminders (no matter how corny the post). A word of caution before hitting that button: your algorithm is going to fill your feed with “tax tips” reels and posts.
And this you have to be wary of because there’s a lot of nonsense out there. I’ve seen plenty of influencers suggesting tax moves that really don’t have a bearing on your situation… or are just flat out inaccurate.
Which is why you should always verify anything you’re seeing online with someone qualified to talk about those topics. Same goes for trusting ChatGPT’s answers to your tax questions — verify everything!
In an age of misinformation, trust is the greatest currency. Trust starts with real conversations from real professionals who know how to ask you the right questions about your unique tax situation… things like irregular wages, shifting life situations, multiple income streams.
I’m happy to be your go-to Milwaukee tax pro, and I’m one appointment away: 414-325-2040
Now, for today, let’s hone in on those irregular wages and what that means for your tax planning…
Freelance Income Tax Strategies That Actually Work For Milwaukee Freelancers
“Productivity is never an accident. It is always the result of commitment to excellence, intelligent planning, and focused effort.” —Paul J. Meyer
Quick Summary: Freelance Income Tax Strategies
- Analyze 2-3 years of income patterns and create worst-case, likely, and best-case scenarios rather than relying on simple averages.
- Use your retirement advantages: Solo 401(k)s and SEP-IRAs offer higher contribution limits than traditional employees get.
- Focus on strategic timing: Set aside 25-40 percent during banner months, delay invoicing in high-income years, and choose Traditional vs. Roth contributions based on current tax brackets.
- Meticulous record-keeping unlocks major deductions, like home office, vehicle expenses, and the QBI deduction.
As someone who’s worked with plenty of freelancers, independent contractors, and gig workers over the years, I can tell you one thing for certain: tax planning with inconsistent income is not easy.
Because traditional tax advice doesn’t always work for you. Your February might bring in 2K while your October delivers 15K. And the standard “save X percent of your income for taxes” guidance falls flat. But here’s what I’ve learned from helping clients navigate this: with the right strategies, irregular income can actually become a tax advantage.
Let me walk you through exactly how to turn your unpredictable earnings into a strong tax strategy.
Understand Your Earnings
Before we dive into freelance income tax moves, you need to know your earning patterns. I tell my Southeastern Wisconsin clients to…
- Pull out your bank statements, 1099s, and invoicing records from the past two to three years.
- Calculate your monthly averages with these records, but remove your highest-earning month from each year. This gives you a more conservative baseline. And for newer freelancers, I recommend basing your initial estimates on your lowest-earning month. It’s better to overprepare than face an underpayment penalty.
- Create three scenarios for the year ahead: your “worst case” (around 20 percent below your conservative average), your “most likely” (based on your historical data), and your “best case.”
Make Estimated Tax Payments
The IRS expects you to pay as you earn, not wait until April 15th. And if you miss these deadlines, you’ll face some hefty penalties.
You’ll want to abide by the safe harbor rule: pay either 90 percent of your current year’s tax liability OR 100 percent of last year’s liability (110 percent if your prior year AGI exceeded 150K). You’ll avoid penalties even if you underpay slightly.
And don’t just divide last year’s tax by four and call it good. When you have a banner month, immediately calculate 25-40 percent for taxes and set it aside. In slower months, you might pay less.
Focus on Tax-Advantaged Accounts
This is where freelancers have an advantage: a Solo 401(k) lets you contribute both as the employee AND the employer. For 2025, that means up to 23.5K in employee contributions (plus 7.5K catch-up if you’re 50+) PLUS up to 25 percent of your net self-employment earnings as employer contributions. (Phew.)
Or, consider a SEP-IRA instead. It’s simpler to set up and maintain, though the contribution limits are slightly lower.
And if you have a qualified High-Deductible Health Plan, an HSA is a must-have: contributions are tax-deductible, investments grow tax-free, and qualified medical withdrawals are tax-free.
Now, for Traditional vs. Roth IRAs, here’s my strategy for inconsistent income: In low-income years, a Roth IRA contribution can be smart. You’re paying tax now when your marginal rate is low, meaning tax-free withdrawals in the future (when your income might be much higher). In high-income years, if you’ve maxed out other options, a “backdoor Roth IRA” strategy might be an option if your income exceeds the direct Roth contribution limits.
Take Advantage of Deductions
There are a lot of deductions on the table for freelancers that could mean big tax savings. And while this is by no means an exhaustive list, here are some of the front-runners I’d recommend looking into:
- Home Office Deduction: If you use part of your Milwaukee home exclusively for business, this is often your biggest deduction. (The actual expense method usually means more savings, but the simplified method relieves you of the heavy record-keeping burden.)
- Vehicle Expenses: Track every business mile religiously. At 70 cents per mile for 2025, this adds up fast.
- Self-Employment Tax Deduction: You can deduct half of your self-employment tax as an above-the-line deduction.
- The Qualified Business Income (QBI) deduction: (recently made permanent under the One Big Beautiful Bill Act) under Section 199A is potentially 20 percent of your qualified business income. Let’s talk through this one together, because the rules are complex.
- Bonus Depreciation and Section 179: These allow you to deduct the full cost of qualifying equipment in the year it’s placed in service (and were also recently expanded under OBBBA).
The imperative here: keep meticulous records. You’ll need them to claim these deductions. And, if the IRS audits your tax return, you’re responsible for proving the legitimacy of every income and expense item you reported.
Harness Tax-Loss Harvesting
When you have a particularly high-earning year, you may realize significant capital gains from investments. Tax-loss harvesting lets you sell investments at a loss to offset these capital gains, which lowers your overall tax liability.
Or, if your capital losses exceed capital gains in a given year, you can use up to 3K of those net losses to offset ordinary income (like self-employment income).
And here’s the strategic advantage: If you have more capital losses than you can use in the current year, you can carry forward these excess losses indefinitely. Which means you can accumulate losses during down market periods when your income is lower, then deploy those losses in future years when your income spikes or you realize significant capital gains.
Master Invoice and Deduction Timing
Picture this: It’s December, and you’ve already had a banner year. That client project you finished on December 28th? Consider holding off on sending that invoice until January 2nd to shift that income into what might be a lower-tax year.
On the flip side, if it’s been a lean year and you’re sitting in a low tax bracket, fire off those invoices to capture income while your rates are low.
Make sure to time your charitable giving too. You can deduct cash gifts up to 60 percent of your AGI. For really significant donations, consider “bunching”: making two years’ worth of gifts in one high-income year to blow past the standard deduction threshold.
And if you have appreciated stock sitting around? Donating that instead of cash gives you the deduction while avoiding capital gains tax.
Retirement contribution timing is key here too. In a high-income year, max out those traditional IRA, Solo 401(k), or SEP-IRA contributions to bring down your current tax bill. Or, in a low-income year, use Roth contributions since you’re paying tax at bargain rates for tax-free withdrawals later.
FAQ
“How do I figure out how much to save for taxes each month when my income is all over the place?”
Start by building three income scenarios: worst-case, most-likely, and best-case. From there, use the most likely scenario to set a baseline monthly savings target of 25–30 percent. But if you have a particularly strong month, save closer to 35–40 percent. Overestimating gives you breathing room in slower months.
“Can I skip an estimated tax payment if I didn’t earn much that quarter?”
Yes, but with a big caveat: estimated taxes are technically due as you earn. If you had a really slow quarter and didn’t make much, your payment can be lower or even skipped. But the key is to stay within the IRS safe harbor rules. If you hit those, you’re protected from penalties even if your payments are uneven.
“What’s better for me: a SEP IRA or a Solo 401(k)?”
If you’re looking for simplicity, the SEP IRA is easy to set up and manage. But if you’re looking to maximize your retirement contributions and potentially lower your tax bill more, the Solo 401(k) typically wins.
“Can I deduct expenses like a laptop or software subscription if I also use them personally?”
Yes, but only the business-use percentage. For example: if you use your laptop 70 percent of the time for work, you can deduct 70 percent of the cost. Keep documentation and be honest with your estimates. Because if you’re ever audited, you’ll need to back it up.
“How do I know if I qualify for the Qualified Business Income (QBI) deduction?”
It depends on your income and the type of work you do. If you’re under certain income thresholds, it’s usually straightforward. But above that, things get complex fast (especially for service-based businesses). Let’s walk through your situation together so I can help you maximize that 20 percent deduction legally.
“When should I contribute to a Roth vs. a Traditional IRA?”
Use your income to guide this. In low-income years, Roth is typically the better play. You’re locking in a low tax rate today for tax-free withdrawals later. In high-income years, a Traditional IRA or backdoor Roth strategy (if you’re above the income limits) can reduce your taxable income and keep more money in your pocket now.
“How can I make tax-loss harvesting work if I don’t trade stocks much?”
Even casual investors can benefit. If you have mutual funds or ETFs in a taxable account, look at your year-end statements. If there are losses, you may be able to sell and harvest those. It’s especially helpful in years when your freelance income pushes you into a higher bracket. You can even carry unused losses forward to future high-income years.
How I can help
Maybe you’ve had years where a big tax bill caught you completely off guard. Or months where you hesitated to send invoices because you weren’t sure how it would affect your tax situation.
That’s why I’m not giving you cookie-cutter freelance income tax advice here. I’ve worked with freelancers long enough to know the only solution here is a plan that actually fits the way your income ebbs and flows. So, let us help you build that plan:
414-325-2040