It often feels like W-2 employees have it easy regarding taxes. Their employers make taxes simpler for them. Self-employed people, from business owners to freelancers, manage their own taxes and deductions, and things can become complicated quickly.
You are responsible for paying what you owe and taking advantage of policies that can save you money. Many people miss out on these deductions every year, so save as much as possible by figuring out if you can write these items off as business expenses!
1. Home Office Deduction
Not every self-employed person has a home office, but many do. If you have a home office setup, you can deduct substantial money. This deduction can be a little complex, as it depends on the size of your home, the size of your office, the amount of office use, and more. Several deductions fall under this one, but it’s important to understand whether or not you qualify for this deduction.
2. Office Supplies and Equipment
Aside from deducting taxes for the office space you use, you can also deduct your office supplies as a business expense. This includes equipment depreciation, ergonomic devices and furniture, security systems and devices, technology upgrades, and more. Even small things like pens, printer ink, paperclips, and staples can qualify!
3. Internet and Phone Services
These are valid deductions if you require internet access and phone services to operate your business. This means you can deduct at least a portion of your cellphone, landline, and internet bill. You can also deduct startup expenses like the cost of your router and cellphone, as long as they were set up specifically for work purposes.
4. Training and Education
Any training courses or education you undergo to further your business are business expenses. These expenses can be deducted if you take an online marketing course, a local entrepreneur college class, or something similar. This is a fantastic deduction because it can save huge chunks of money and encourages self-employed people to improve their business however they can.
5. Insurance Premiums
One of the top types of insurance to deduct is your business insurance, followed by your home office insurance. But you may also be able to deduct portions of your health, car, renter’s, and home insurance. Like with the home office deduction and many other deductions here, you can only deduct the amount that contributed to your business.
6. Retirement Contributions
For the most part, you can only deduct retirement plan contributions from your income tax return if you have a qualifying plan. The one-participant 401(k), SEP IRA, SIMPLE IRA, and Keogh plans are the most common plans that qualify. Supplemental HSAs, traditional IRAs, and Roth IRAs may also qualify.
7. Transportation
If you solely work from home in an office, this deduction likely doesn’t apply to you. But if you have to commute for work, whether going to a client’s home, attending an event, or running business errands, these may be eligible as deductions. You may be able to deduct portions of your car insurance premium, gas costs, repair expenses, and more.
8. Travel Expenses
You can only deduct travel expenses if you travel for work. Vacations are, sadly, not a deductible business expense. But if you fly or drive anywhere for work purposes, the cost of these trips can be deducted. This includes airfare, checked bag fees, business meals, hotel charges, rental car expenses, and similar work-related things.
9. Rent and Mortgage Portions
This is one of the most lucrative aspects of the home office deduction. You can deduct a portion of your rent or mortgage and your mortgage interest if you have a home office. This deduction can also apply if renting a separate office space or another work-related property.
10. Subscriptions, Services, and Memberships
You often need certain subscriptions, services, and memberships to run a business successfully. Internet upgrades, journal subscriptions, magazine subscriptions, professional organization membership fees, and more can be deducted. As long as these regular payments relate to your business or line of work, they qualify.
11. Utilities
You cannot deduct all your utilities, but you can deduct portions. Any work-related utilities can be considered. For example, most self-employed people who work from home use more electricity throughout the day than if they went into an office. Any utility use specifically for business purposes counts as a business expense.
12. Snacks, Beverages, and Meals
This one might feel too good to be true, but in many cases, you can deduct food costs. Just like a business owner can deduct the cost of taking clients out to dinner, self-employed home workers can deduct the food they eat while working. You can’t deduct the whole cost; it’s usually 50%. It’s best to deduct simple foods and drinks, like coffee, lunch sandwiches, and snack crackers. Extravagant meals and drinks are not seen as necessary business expenses.
13. Self-Employment Tax Deduction
The self-employment tax deduction is one of the most beneficial deductions. While self-employed people are required to pay a specific self-employment tax to cover Medicare and Social Security, you can often deduct half your income from this. Self-employed people can deduct half their self-employment net income when filing if they meet all the requirements.
14. Credit Card Interest
If you have a business credit card with which you make work-related purchases, you can deduct the interest on this card. This deduction applies to federal tax returns only since credit cards operate federally. The IRS allows you to deduct interest on business purchases considered “ordinary and necessary.” Many expenses on this list would qualify, so consider using your business credit card to pay for them.
15. Startup Expenses
If you just switched to remote and self-employed work this year, you can likely deduct a lot concerning startup costs. You usually have to spend a decent chunk of money when setting up your self-employed work, whether buying a new desk or putting a down payment on a vehicle. You can deduct up to $5,000 in startup expenses within one year but can deduct more in the following years.
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