Self-employed contractors don’t get as much legal or financial protection as traditional employees. To make up for this, self-employed contractors have more tax deductions.
But what exactly do these deductions cover?
We’ve put together a complete, 2019 self-employment tax deduction list to help you get through tax season this year.
So let’s dig in.
You can deduct the cost of your workplace, whether you own it or rent it, from your taxes. This cost can include things like your mortgage interest, property taxes, homeowners insurance, home depreciation, utilities, etc.
But there are a few restrictions you have to follow.
For example, you can only deduct the percentage of your housing expenses that corresponds to the percentage of your home office. In other words, if your home office takes up 20% of your house, you can deduct 20% of your housing expenses.
Also, you can only deduct these expenses if you use your home office exclusively for your work. If you set up your desk in a guest bedroom, you can’t deduct these expenses because you also use the room for guests from time to time.
Any office supplies or work items you buy exclusively for business purposes are deductible.
This can include things like printer paper, pens, pencils, notebooks, computers, copiers, printers, and more. Even larger items, such as a new office chair or desk, can be deducted from your self-employment taxes.
You can also deduct the expenses of other equipment you need for your business. For example, if you run a sock company, you can deduct the cost of material, thread, dye, and anything else you have to buy.
Internet/ Phone Bills
Since you work from your home, you can deduct some of your internet and phone expenses from your taxes.
But again, it comes down to a percentage.
If you use your phone to call your mother or your friends, you can’t deduct the entire monthly bill. You can only deduct the percentage you use for business purposes.
The same applies to your internet usage as well.
If you’re a self-employed marketer and you took a class on marketing, the cost of that class is deductible. You can deduct any educational expenses or material you purchase to further your career.
For example, an editor can deduct the cost of buying a style guide. But they couldn’t deduct the cost of buying a fantasy novel they plan to read every night to relax before going to bed.
If you have to get a license or permit to operate your business, you can deduct the cost of those licenses/permits and any supplies you had to buy in order to get them.
Some careers require you to renew licenses or permits every few years. This is another cost you can deduct from your self-employment taxes.
Work from 1099 Contractors
You can deduct the cost of hiring other 1099 contractors if they provided important work for your business.
Let’s say you’re a professional trainer who wants to set up a website. Even though you’re self-employed, you don’t have to do this yourself. Instead, you can hire another self-employed website designer to do the job for you.
At some point in your business venture, you’ll have to spend some money on advertising or promotional materials. This might including designing and ordering business cards, hiring a marketing agency, running ads on social media, launching an SEO campaign, etc.
No matter what type of advertising you use, the amount you spend can be a tax deduction.
On top of that, you can also deduct any expenses you donated to a charity for advertising purposes.
Travel and Vehicle Use
You can only deduct travel expenses if it lasts longer than an average workday. For example, if you have to book a hotel away from home for a night, you can deduct that cost.
The purpose of your travels must also be solely for business purposes. This might include going to meet potential clients, attending a class that furthers your business, etc.
If you have to fly or take public transportation, you can also deduct the cost of the tickets. If you drive your own car, you can deduct some of the costs of gas and related expenses using the Standard Mileage Rate.
A meal can become tax deductible for one of two reasons. You can deduct a meal if you’re eating with a potential client or entertaining a business partner. Or you can deduct a meal if you eat it during your business travels.
But you can’t deduct the entire meal.
You can only deduct 50% of the cost. So make sure you keep your receipts.
If you pay for your own health insurance premiums, you can deduct the expense for your health, dental, and qualified long-term care insurance.
If you have any business insurance, you can also deduct those premiums from your self-employment tax.
Have you had to take out a business loan to help cover some of your business expenses? While you can’t deduct the entire loan, you can deduct the interest rate.
However, this only applies to business loan interest. You can’t deduct any credit card interest even if you used it to buy business items.
If you rent office space outside of your home, the amount you pay for the rent can be a tax deduction.
But you can also deduct other types of rent as well.
Did you rent a car for a business trip? Do you rent office supplies? You can deduct the cost of those items and more.
Understanding Your 2019 Self-Employment Tax Deduction List
Understanding your self-employment tax deduction list is kay for an independent contractor. Once you know what type of expenses you can deduct, you can get a lot of money back that you’ve spent for business purposes.
Did you have a hard time with taxes last year?
Make sure you click here to learn how to get out of tax debt.