import QuickAnswer from ’../../components/QuickAnswer.astro’; import KeyTakeaways from ’../../components/KeyTakeaways.astro’; import FAQ from ’../../components/FAQ.astro’;

Net profit = Gross Revenue - All Business Expenses. As a freelancer, your net profit is what you actually pay taxes on. Track ALL expenses including software, equipment, home office, insurance, and professional services to reduce your taxable income legally.

<KeyTakeaways items={[ “Net profit is Gross Revenue minus ALL business expenses”, “Net profit is what you pay self-employment tax on”, “Track every expense - even small ones add up”, “Common overlooked expenses: software, subscriptions, education”, “Aim for 60-70% profit margin in service businesses” ]} />

Net Profit Formula

Gross Revenue
- Cost of Goods Sold (if applicable)
= Gross Profit
- Operating Expenses
= Net Profit

Common Freelance Expenses

Category	Examples	Avg % of Revenue
Software/Tools	Adobe, Microsoft, project management	3-5%
Professional Services	Accounting, legal, consulting	2-4%
Marketing	Website, advertising, networking	5-10%
Insurance	Liability, health, disability	5-10%
Office/Workspace	Home office, coworking	3-5%
Equipment	Computer, phone, furniture	2-5%
Travel	Client meetings, conferences	2-5%
Education	Courses, books, certifications	1-3%
Total Expenses		25-45%

Net Profit Example

Item	Amount
Gross Revenue	$100,000
Software/Tools	-$4,000
Insurance	-$8,000
Marketing	-$5,000
Home Office	-$3,000
Professional Services	-$3,000
Other Expenses	-$7,000
Total Expenses	-$30,000
Net Profit	$70,000
Profit Margin	70%

Related Guides

• Schedule C Deductions Checklist - All deductible expenses
• Self-Employment Tax Calculator - Tax on net profit

<FAQ questions={[ { question: “What’s a good profit margin for freelancers?”, answer: “Service-based freelancers should aim for 60-70% profit margin. If your margin is below 50%, you may be undercharging or overspending. Track expenses carefully to identify areas for improvement.” }, { question: “Should I include owner’s salary in expenses?”, answer: “No, as a sole proprietor, you don’t pay yourself a salary. Your net profit IS your income. You can withdraw money for personal use (owner’s draw), but it’s not a deductible expense.” }, { question: “Can I deduct equipment purchases?”, answer: “Yes, equipment used for business can be deducted. Items under $2,500 can be expensed immediately. Larger items may need to be depreciated over time, or you can use Section 179 to deduct in year one.” } ]} />