Self-Employed Tax Deductions

Whether you’re a sole proprietor or an independent contractor, you may be curious about 
self-employed tax deductions. Although there are many business expenses you can write off, you should also be aware of costs that aren’t eligible to be claimed as 1099 deductions. 

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Deductible expenses

Here, we’ve provided a list of self-employed tax deductions and explained what qualifies (and what doesn’t qualify) as a business expense to help you when you file your tax return.

Startup costs

The first tax write-off that self-employed people should keep track of is start-up costs. They’re costs incurred to get your business up and running so you can earn income. To qualify for this tax deduction, these must be costs you paid prior to opening your business. 

Examples include analyzing potential markets or products, creating advertisements, paying employees for training purposes, travel costs related to meeting with potential suppliers or customers, and salaries or fees to pay consultants or professional services.

Self-employment tax

Self-employed workers have to pay 15.3% (12.4% Social Security tax and 2.9% Medicare tax combined) on their wages, tips, and earnings up to a certain income threshold. This is twice what an employee pays because a self-employed worker must pay what their employer would pay if they were working for someone else. 

The good news is you can deduct the employer portion to determine your adjusted gross income. This deduction will only affect your income tax.

Business vehicle, parking, tolls and repairs

Mileage: Perhaps you use your car to meet with clients or pick up supplies. In either case, you'll want to claim your self-employed mileage deduction.

The 2024 per-mile business rate is $0.67 for the work-related miles you drive. To use this deduction, keep track of your mileage for business purposes. Find out more in our guide on self-employed mileage deduction rules.

Parking fees: If you get a parking ticket, unfortunately, you won’t be able to deduct it as a business expense. You can, however, claim parking fees for things such as parking your car at a client’s office or for a conference.

Tolls: The business-related tolls you’ve paid are tax deductible.

Repairs and maintenance: You’re permitted to write off car repairs to operate and maintain your car used for business purposes. This type of tax deduction is beneficial for independent contractors, such as gig drivers or delivery drivers.

Travel & meals for business

When you’re traveling to a conference or business meeting, you can expense certain types of travel and meals.

For instance, travel expenses for flights, hotels, taxis, and car rentals are tax deductible as long as they are for business purposes. However, you can’t claim travel expenses for your family unless they are your employees.

Furthermore, you can claim up to 50% of the cost of a business meal. Just be sure that it’s not overly fancy or has some entertainment component.

Keep in mind that groceries are considered personal expenses and are not tax deductible.

Office supplies

The cost of office supplies includes things like paper, pencils, postage, and pens. You may deduct more expensive items, such as office equipment, in the year you buy them. However, the item must have a useful life of a year or less. Office equipment with a useful life of a year or more will likely need to be depreciated. 

Based on your profession, you may be able to deduct other types of supplies:

• Gig drivers can deduct supplies such as floor mats, seat covers, and cup holders.
• Personal trainers may write off exercise mats, weights, and towels.
• Real estate agents can expense signage, letterheads, and lock boxes.

Internet and telephone

If you use your cell phone and internet for both personal and business, you can deduct the percentage of your bill that is used towards business. Be aware that if you have a home phone line, you can’t deduct it even if you have a home office. However, if you have a secondary line or long-distance business phone calls, you can deduct 100% of this amount.

Home office deduction

When it comes to the home office deduction, self-employed individuals can only claim it for parts of their home that they regularly and solely use for their business.

You can deduct expenses, such as rent, insurance, utilities, repairs, and property taxes, mortgage interest. There are two ways to calculate the deduction:

1. the simplified method ($5/sq ft and multiply it by up to 300 ft)
2. the regular method (taking the actual expenses and calculating the percentage you use for business purposes).

Client gifts

Showing your appreciation to your clients by giving them gifts is an important part of keeping them satisfied. You can deduct up to $25 for the cost of business gifts for each person. Extra charges such as packing, shipping, or engraving don’t typically add much value and cannot be included in the $25 limit. If you’re treating your client to a sporting event, then that is considered entertainment and cannot be deducted.

Advertising

When you’re promoting your business to attract new customers or keep current ones, you can deduct the cost of advertising. These costs must be ordinary and commonly accepted in your industry. For example, reasonable advertising costs related to your business or that provide goodwill to the community are accepted. However, lobbying costs and advertisement that are part of political parties or convention programs are not tax deductible.

Legal and professional fees

When you need to pay for legal and other professional fees that are ordinary and necessary to run your business, these can be claimed as business expenses. This may include fees related to contract negotiations, defending copyright or trademark claims, and legal actions to collect money from clients. You cannot deduct legal fees if they are for personal matters. 

Loan and credit card Interest

If you’ve paid interest on credit card purchases necessary to operate your business, you can claim the interest as a tax deduction. However, it must be your own credit card, not someone else’s. You should also have a dedicated credit card used solely for business expenses.

Business insurance

It’s important to protect your business, and if you’ve paid for business-related insurance premiums, you can usually deduct them. For instance, this may include premiums paid for liability insurance, workers’ compensation insurance, or auto insurance.

Health insurance deduction

Self-employed individuals can deduct health insurance premiums for themselves and their families. However, you can’t make claims during the months when you or your spouse participate in an employer-sponsored health plan. 

Be sure your claims do not exceed the amount of income you earn from your business. You can also deduct long-term care insurance costs, but there’s an annual limit to how much you can deduct, which is based on your age.

Retirement savings contribution

You can deduct your contributions based on certain retirement accounts:

• Keogh plan
• Roth Individual Retirement Account (IRA)
• Simplified Employee Pension (SEP IRA)
• Solo 401(k) or one participant 401(k)

Contributions towards your employees’ plans can be deducted as a business expense. Regardless of whether you're claiming contributions for your employees or yourself, these deductions are capped by an annual contribution limit based on the plan type.

Continuing education deduction

It's important to keep your skills up-to-date to run a successful business. Fortunately, You can deduct the costs of tuition, supplies, books, lab fees, transportation to and from your classes, and other related expenses. Make sure the education is for maintaining or improving your skills for your current work.

Dry cleaning

Dry cleaning that is done while you’re on a business trip is tax deductible. However, it can’t be claimed if you did your dry cleaning before or after your trip. 

Clothing

Generally, clothing that can be used in both a professional and personal setting cannot be written off as a business expense. Only clothing that is used specifically for business purposes, such as a work uniform or safety equipment, is tax deductible.

Memberships

Professional organizations: If you’re a member of a professional organization, you may be eligible to claim the membership fee as a tax deduction. You can deduct the chamber of commerce, boards of trade, business league, or professional and trade organizations.

Country clubs: There are certain restrictions, such as memberships to country clubs or travel-related clubs aren’t permitted to be deducted from your taxes.

Gym: Typically, gym memberships are not tax deductible. That’s because the IRS considers this to be a personal expense. However, if you’re a personal trainer, fitness coach, or a professional athlete, then you may be able to justify this as a business expense.

Haircuts

Perhaps you’re getting a haircut for an upcoming branding photoshoot. Although you’re trying to look professional, it’s generally not considered a business expense because you’re likely to get a haircut regardless of your line of work.

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