Is Working From Home Costing You?

If you’ve even considered working from home, particularly as sole proprietor (aka, freelancer, contract worker, self-employed) you’re probably familiar with the benefits. But is it possible that working from home might actually cost you money?

Spoiler alert: Yes, friend. Sadly, this can be true.

There are many tangible and intangible perks to being your own boss and working from home – the biggest being that you get to make your own schedule and own your own time. Working from home will likely allow you to reduce, or even eliminate, child care expenses. Your commuting costs will drop to nearly nothing as you’ll no longer be filling up the car every couple of days and blowing money on parking meters and garages.

When you’re not going to work, you won’t have to dress professionally every day, saving hundreds (if not thousands) of dollars on clothes and dry cleaning expenses. And it’s super easy to avoid costly lunches in restaurants when there are no co-workers to invite you and you’re wearing yoga pants, no make-up and your greasy hair is in a ponytail.  

No co-workers also means there’s no one to guilt you into $10 donations for office birthday cakes or to pressure you into supporting their kid’s school’s wrapping paper-cookie dough-cheese-popcorn-jewelry sale.

The experts at estimate that working from home saves people about $4,100 each year NOT including any savings from child care expenses, which can be huge. You can even estimate your own potential savings by using this calculator.

But there’s another side to the proverbial coin. Working from home can also COST you money.

For starters, you’ll need to earn more when you work for yourself in order to have the same amount of spendable income you had working for someone else, perhaps as much as $10,000 to $15,000 a year more. Why? Mostly because of taxes, but there are some other reasons, too.

Sole proprietors get hit harder than employees in the areas of social security tax, medicare tax, business expenses and health insurance. (So much so that the social security tax plus the medicare tax are often referred to as “the self-employment tax”.)


Here’s why: Social security tax is 10.4 percent. If you work for a company, you pay 4.2 percent and the company pays 6.2 percent. If you work for yourself, you pay it all. Medicare tax is 2.9 percent. If you work for a company you split that bill down the middle. If you work for yourself, you’re stuck with the whole bill. So that’s 13.3 percent of your income going to taxes where an employee only pays 5.6 percent.

Most military spouses probably have the option of being covered on a spouse’s health insurance – a considerable savings that non-military sole proprietors don’t get and a major reason why many in the civilian world never even consider hanging out a shingle.

And then there are all those business expenses … no one reimburses you for them when you work for yourself. Whatever business you choose to enter, you will be fronting all the costs yourself – and those costs will very likely include things like a nicer computer and high speed internet. Now, you will get to deduct some of these expenses from your end of the year taxes, but you’ll still have to pony up in the moment.

Not to mention that working for yourself means you won’t get paid maternity or sick leave or paid vacation time. If you aren’t working, you aren’t earning. Period. You’ll also miss out on things like 401k matching and disability insurance.

Yes, being home all day means you aren’t as likely to go out for lunch, but it also means you’ll be spending more on utilities. Forget the schedules on your thermostat, you’re going to want that temp somewhere in the comfortable zone all the time. You’ll also be leaving more lights on for longer and using more water.

The good news is that you can write some of these expenses off your taxes – the bad news is that self employment usually means that you’re taxes will be too complicated to do by yourself. You’ll likely be paying a CPA to do them for you.

But maybe you (like me) think owning your own day and being able to maintain a career despite the chaos of military life makes all of the extra expenses worth it. If so, here are a few tips from experienced work-from-homers that are guaranteed to keep you in flip flops and yoga pants for years to come.

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