Tax deductions are a saving grace for self-employed individuals who are paying everything out-of-pocket. When it comes to being an independent contractor, every cent of your earnings count. You don’t want to overlook any deductions that could considerably reduce your tax bill. Put money back into your own pocket with these self-employment tax deductions you don’t want to miss out on.
If you drive a car or use ride-hailing apps, you can deduct the expenses that you spend on your trips. Just ensure that you keep a detailed record of each trip which includes the mileage or fare, date of the trip, and purpose for the trip. It doesn’t matter what you do with the car that you drive, whether you put it up for cash at title loan places or if you’re renting it out from car rental companies, as long as you drive it for your business, your vehicle usage is tax-deductible. This includes oil changes, gas, insurance, and repairs.
One of the perks of self-employment is that you have the time and freedom to keep learning and perfecting your skills. You have every incentive to participate in workshops and classes that help improve your expertise since the costs of these classes are actually tax-deductible. Just make sure that what you’re learning is directly relevant to your job.
You don’t have to shoulder the financial burden of starting up your very own business on your own. All the expenditures you rack up when starting up your new business are tax-deductible up to $5,000. Anything over that threshold will be capitalized and amortized over a period of 15 years. Startup costs include any and all expenses that you incurred while creating your business such as insurance fees, licensing fees, permit fees, office supplies, market research, and cost of labor.
As a self-employed individual, you most likely rely heavily on phone calls and the internet in order to communicate with your clients. Thankfully, the hefty utility costs you incur from using these services are tax-deductible, but only the expenses that are directly linked to your business operations. It helps to have a separate phone line specifically for your business and a time tracker to monitor how much time you spend online for your job to get an accurate estimate of just how much can be deducted.
Whether you’re renting out an office space or working from a home office, the rent you pay may be deducted from your taxes. Included in these deductions are the utilities used for your business and any equipment you have to rent or buy. Any cancellation fees included in the termination of a business lease is also included in the tax deductions. However, if you own the property, even partially, you will not be eligible for tax-deduction on rent expenses, unfortunately.
Any advertising fees, whether digital or physical, are tax-deductible. This ranges from billboards, flyers, signage, Facebook ads, websites, and TV commercial spots. Advertising can be a great way to get the word about your business out there, but it’s also quite costly, so this is one tax write-off you shouldn’t pass up.
Going the self-employed route can be incredibly daunting, but thankfully, there are plenty of incentives to do what you’re passionate about. Tax deductions help you get back the money you pay out-of-pocket so you can keep doing what you love with less of a financial strain.