Being self-employed is hard work. Whether you're a freelancer, on-demand worker or independent contractor, tracking finances and preparing taxes can take some work. Fortunately, there are several business tax deductions that self-employed folks can take advantage of this year when filing their taxes.
Here are five helpful tips and shortcuts that can lower your tax liability and help you save money for your business.
1. Home office. Did you know that you are able to deduct a portion of your rent, mortgage interest, property taxes and utilities as a home office deduction if you use a dedicated space in your home solely for your business? Since your office is within the walls of your home, you can write off a portion of your home expenses based on the square footage of your office used for your business.
2. Equipment and supply expenses. What does it cost to run your business? Do you use boxes of paperclips every week? How many Post-it notes are piled up on your desk? You don't think about the costs of these smaller items when you're an employee, but when you're self-employed, you realize how quickly those everyday items add up. Certain items used for your home office are deductible, including equipment such as printers and computers – even replacement ink and toner. All of those relatively small and possibly overlooked costs can be deducted from your business income.
Just make sure that they are costs dedicated to your business. Also, don't forget about your home office furniture. Your desk, your chair, your printer stand and even your trash can all be deducted on your tax return, but remember to keep your receipts for easy tax filing later on.
3. Travel and education. For the self-employed, training and education can come at a hefty price. You may have to pay for a conference or class, travel and even a hotel room, depending on the length of your stay.
Luckily, business travel, education and training expenses may all be tax deductible. Even taxi, shuttle and parking costs are tax deductible. If you rent a car when you arrive at your destination, the expense is deductible as long as the car is used exclusively for business.
4. Hardware and software. Did you buy a desktop computer, a laptop, a new monitor, an iPad or any other piece of technology to help grow your business? What about computer software? If you didn't buy a new computer this past year, but you had to update your current software or purchase new software to get the job done, you can write that expense off. This is an especially important deduction to remember because, as we all know, software can get expensive.
5. Health insurance. One of the benefits of being self-employed is that you may be eligible for tax breaks that you may not be eligible for if you have an employer. As a business of one, you may be able to deduct what you pay for medical insurance for you and your family without having to itemize your tax deductions or being subject to the threshold limits that W-2 employees are subject to.
There are several benefits that come with being a self-employed worker, including money, flexibility, independence and the ability to deduct expenses that you never even knew were possible.
Self-employed filers are always looking for ways to save some extra cash and cut down on business costs. Knowing these commonly missed business tax deductions allows you to spend less time worrying about your taxes and more time saving money and focusing on your business.