Tax savings for the self-employed
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One of the many perks of self-employment is that you write off business expenses on your taxes — I mean paying less is a good thing right? Think of tax deductions as doing double duty: these expenses help you run your business like the boss that you are and they save you money (on taxes) at the same time.
Making sure you know exactly the types of business expenses you can write off is key when it comes time to file your taxes. That way, you can make sure you hold onto those receipts and know exactly what it is that you spent to maintain and grow your Business-of-One.
Here are 14 self-employed expenses you can write off — don’t hesitate to claim them. After all you’ve worked hard for your money.
Advertising and Marketing Expenses
How will others know about your business if you don’t market it? Any expenses related to advertising or promoting your business count. For instance, if you have a subscription to an email marketing service, that can fall under marketing expenses. Or if you’re launching a new online course and decide to spend a few hundred bucks on Facebook ads to get the word out, that counts.
When going to business conferences in person was a thing pre-COVID, I printed business cards to hand out to prospective clients. You bet I filed that under marketing expenses.
Books, Courses and Coaching
Growing and sustaining a business means that you’re continually learning on the topics relevant to your industry, like new audio editing programs or paying coaches to help you with new business strategies. All of these expenses can be tax deductible.
When it comes to books, make sure that they’re relevant to your business. Let’s say you’re a freelance writer and want to learn about how to write whitepapers for a software company. Purchasing a book to teach you how to write them is an acceptable business expense, whereas a book about inspirational writing quotes probably isn’t.
If you like attending seminars or conferences (virtual or in-person), these count as businesses as well.
You read that right: you can deduct health and dental insurance premiums if you’re self-employed. Depending on the amount you pay and other eligibility factors, you may even be able to deduct health insurance for your spouse and dependents. This only works if you (and your spouse if you’re married) weren’t eligible for an employer-subsidized health plan.
For example, if you left your job six months into the year — you can only claim your health insurance premiums for the six months you weren’t with your employer.
If you’re in an industry that has professional associations, you can deduct those dues on your taxes. As a finance journalist, I belong to a number of national journalism associations and claim those on my tax return. Perhaps you are a member of a trade association or even the chamber of commerce — those count too.
Stay at home parents no doubt know that working when there are young children around isn’t exactly the best for productivity (who else checks on their kid when it gets too quiet?). The good news is that childcare expenses you incur while you’re working can be tax deductible via your personal tax return..
Maybe it’s a good idea to call your trusted babysitter or the local daycare center?
Legal and Professional Expenses
Need help from a financial planner to work out your business investment plan? Or do you need a lawyer to draft up an operating agreement for a potential business partnership? Hiring these types of professionals are legitimate business expenses. After all, you want to make sure your business is running smoothly.
Don’t forget, fees paid to certified public accountants (CPAs) or services like Collective also count.
Those who work from home can write off part of the internet bill — aka the portion you use for your business. Sorry, the time you spent scrolling through Youtube watching cat videos isn’t going to cut it.
To be able to deduct your internet bill, calculate the percentage of the time spent on business activities and use that as your baseline. So if your internet bill comes to $80 a month and you figured out that you spend about 50% of your time online for your business, you can deduct half that amount. In this case, that’s $40 each month.
Any notebooks, stamps, postage fees, ink cartridges, printers, and even your laptop is tax-deductible. It goes without saying that these items need to be used specifically for business purposes. If you use your printer for both business and personal use, it may be tricky to put that as an expense on your tax return (that’s why it’s beneficial to consult a tax professional).
Rent or Coworking Space
Sure, it’s nice to work from home or the occasional coffee shop (when local regulations allow for it), but wanting a change of scenery is perfectly normal. Renting out a space at a coworking space — whether it’s for the day, or you have a dedicated desk — counts as a business expense. You get the perk of a tax writeoff and fast internet to get your work done.
If you host workshops or events, any place you rent to host them also counts as a self-employed expense.
As long as you have a dedicated space that’s separate from the rest of your home that’s solely used for your business, your home office counts as self-employed expense. Sadly, that means your portable standing desk you use on your dining room table won’t count, unless you’ve decided to not use that room to eat meals with family and friends.
There are two ways to deduct your home office expenses: the simplified method which allows for up to $1,500 a year, or you can itemize your expenses and be able to deduct items like utilities. Either works, but it’s probably best to talk to your accountant to see what option is the better choice.
Flights and Hotels
Anytime you travel for business reasons — like an in-person conference or to do site-specific client work — you can deduct that on your taxes. That means your flights, long distance bus rides and hotel stays fall under this category.
Obviously you’ll need to eat during your trip, so meals can count, but only a percentage of what you spend.
Gas and Mileage
Speaking of travel, using your car to travel for business-related purposes (again, like for client meetings or projects) is tax-deductible. Here’s where it pays to carefully track where you go, because you can deduct a certain amount per mile you drive.
Wages you pay for contractors are business expenses, so go ahead and deduct them! Of course, it has to do with helping your business, like a social media manager or a photographer who helps you update photos on your website.
If you’re an S Corp, you also get to write off your owner-employee wages in addition to contractors you pay.
Cell Phone Bill
Like your internet bill, you can deduct a percentage of your personal cell phone bill you use for business purposes. Yup, we’re talking about activities such as calling clients, interviewing sources for articles or for market research purposes, checking your business email and posting on social media for your business.
To figure out how much you can deduct, calculate the percentage of the time you use your phone for business. So if it’s 25% of the time and your cell phone bill is $100 per month, you can deduct $25.
And one last thing about writing off business expenses: No matter what you write off, it’s crucial you accurately keep track of all your expenses on a consistent basis. That means saving all your invoices and receipts and putting them in a safe place so you can access them when it comes time to file your taxes.