Being your own boss bears a lot of fruit, but it also brings more complicated tax filings and typically higher tax bills. Now that you are self-employed, tax deductions should be at the forefront of your mind as you operate your business and earn income. Why? Because understanding all the different types of self-employed tax deductions can help you reduce your tax bill come April, and may stave off some of Uncle Sam’s outstretched hand.
Don’t feel like you have to conquer this tax beast all on your own. If you feel like you could use a hand in deciphering deductions for your business, consider consulting with or hiring a tax specialist. They can help you minimize your audit risk, ensure you keep on the straight and narrow of the tax laws and identify all the various deductions appropriate for your individualized business.
Eligible Self-Employment Tax Deductions
- Internet Fees – If you have a web page, there is a good chance some or all of the Internet costs are deductible.
- Home Office - This is a tax deduction that can raise your audit risk. You will want to research the pros and cons of deducting a portion of your home which is used exclusively for your home business.
- Phone Expenses - Calls for business purposes are all deductible.
- Office Supplies - Office supplies used exclusively for your business are deductible.
- Advertising and Promotion – This is a huge chunk of many businesses budgets. This can include media, internet and any other advertising done to promote your business (i.e. business cards, fees to marketing agencies or promotional video producers…etc.)
- Dues and Subscriptions - This would include clubs, networking organizations or even magazines which are necessary for your business.
- Licenses and Permits – Business registration fees and permits are deductible.
- Meals and Entertainment – You can deduct 50% of the cost of taking our take clients to lunch or dinner. Just keep a log of who was at the dinner, what was discussed and where the meal took place.
- Equipment - Equipment such as computers, cell phones and iPads can be partially or fully deductible. Equipment necessary to run your business is also deductible (i.e. lawn equipment for a landscaping business).
- Travel - Business related travel is deductible.
- Auto Expenses – Usually writing off car and fuel expenses are done on a per-mile cost. You will need to keep track of your business usage if the vehicle is also used for personal use.
- Outside Services - Costs related to your business such as tax and accounting help or any other guidance is typically deductible.
- Insurance Premiums – If you are self-employed and pay for your own health insurance, you can write off your premiums if you meet certain requirements. You can also deduct life, property & casualty, or business insurance.
- Rent or Lease Payments – If you are renting an artist studio or paying a building lease you may be able to write off these payments.
- Repairs and Maintenance – Repairing equipment for your business or even a computer counts.
- Utilities – Things like electricity, gas..etc. However, working from home would require you to only write off a percentage of your utilities based off your business usage. Consulting a tax specialist can give you a better understanding on how to do this properly.
If you have additional tax questions, consider these other resources for answers:
Top 5 Home Business Tax Deduction Questions
Top 5 Self-Employed Tax Return Audit Questions
5 Common Self-Employment Tax Questions
Disclaimer: I am not a tax specialist or licensed tax attorney. The information provided here should be used as a general guide. For specific questions about your own taxes, please consult a tax specialist or refer to the official IRS publications.