Quintessential Careers Blog

As you get ready to file your taxes this year, don’t forget to investigate all of the potential deductions that may be available to self-employed workers.   

 

As experienced self-employed workers already know, working on your own can be expensive. Without a large, stable organization picking up the tab, it’s easy to rack up a list of additional costs. These can include IT hardware, maintenance, transportation, supplies, and client lunches, all of which come out of a rate that may be tight to begin with.

 

But there are also plenty of cost benefits involved in flying solo. Alongside specific luxuries (such as creating your own hours and eliminating a commute), certain tax deductions are also available to self-employed workers. If you research these deductions—or enlist the help of a qualified accountant—you’ll benefit when it’s time to square up with Uncle Sam.

 

Here are a few of the most common deductions that you’ll need to take into account as you file this year.

 

Mileage

 

Don’t forget to account for the cost of your gas and vehicle maintenance if driving is part of your standard business day (or year). Mileage deduction rates change yearly, so remember to look at the new rate each time you file.

 

Equipment and supplies

 

Every time you buy a new computer, office furniture, or a stack of printer paper, hold on to your receipts. You may be able to provide an estimate of your supply totals and get away with it, but it’s better to collect proof of your investments so you can account for every penny if you’re subjected to a random audit.

 

Half of your self-employment tax

 

Self-employed workers generally pay both the employer half and the employee half of the Social Security tax of 12.4% on the first $118,000 of self-employed business income. You may be able to deduct the employer-equivalent portion (6.2%) from your net income when calculating your adjusted gross income for your US Federal income tax. Talk to your tax preparer about your specific circumstances.

 

Home office deduction

 

In addition to supplies, you may be able to deduct the cost of maintaining your workspace, which can include all or portions of your home depreciation, mortgage interest, utility costs, homeowners insurance, and home maintenance. For example, if your home office occupies about 10% of your house, you may be able to deduct 10% of your electricity bill from your taxes.

 

Health insurance premiums

 

If you’re paying for your own health coverage without the support of an employer, you can deduct the cost of your health, dental, and long term care insurance from your total taxable income. This also includes premiums paid to cover your dependents and children, so be mindful of this. Calculate the amount you can deduct by using the Self-Employed Health Insurance Deduction Worksheet in IRS Publication 535.

 

Phone and internet

 

You can deduct the cost of your phone, fax, and internet use, but exercise caution. This applies only to the calls and usage that relate directly to your business, not to your entire monthly bill. It can be difficult to estimate the percentage of your internet usage that applies to your business, but you’ll need to do your best. Keeping records can help with this assessment.

 

For more on how to stay in control of your income and expenses as a self-employer worker, explore the tips and guidelines available on Quintcareers.

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