If you’re a self-employed worker, you should take advantage of certain tax write-offs. Since you aren’t classified as an employee, you won’t have access to federal and state-required benefits like minimum wage, overtime pay, paid vacation, etc. However, you will have access to tax write-offs. And taking advantage of these write-offs can save you big bucks on your income taxes.
#1) Home Office
Assuming you use a dedicated part of your home for business-related purposes at least 50% of the time, you are eligible for the home office tax deduction. The Internal Revenue Service (IRS) offers a simplified and regular format for home office deductions. The former uses a fixed formula of $5 per square feet (up to 300 square feet maximum), whereas the latter uses an itemized formula that includes factors like mortgage/rent, electricity and more.
You can also deduct the cost of your phone from your federal income taxes, assuming you use it for business-related purposes. Of course, this is a smaller deduction compared to the home office, but it’s still extra money that you can save. Keep in mind, however, that the amount of which you are eligible to deduct varies depending on the cost of your bill and how much time you actually spend using your phone for business-related purposes.
Do you use your vehicle for business? If so, you can deduct this expense from your federal income taxes. It’s not uncommon for ride-hailing drivers to deduct their vehicle from their taxes, for instance. Because they rely on their vehicle to perform this work, they are eligible for this deduction. But even if you use your vehicle for other business-related purposes — driving to job sites, meeting with clients, etc. — you can still deduct it from your taxes.
#4) Health Insurance
With the average cost of health insurance now exceeding $321 per month, many self-employed workers struggle to cover their premiums. The good news is that you can deduct the cost of your health insurance premiums from your federal income taxes.
If you use your internet for business-related purposes, you can deduct it from your federal income taxes. According to Chron, eligible deduction amounts vary depending on the percentage of time that you spend using the internet for business-related purposes. If you use it half for business and half for personal purposes, you can deduct half the cost from your taxes. Of course, you should consult with tax professional to learn more about these and other deductions for self-employed workers.