It’s no secret that filing taxes is stressful.
The paperwork is frustrating. The anxiety over determining how much you owe is intense. Figuring out what deductions and credits you qualify for is confusing.
And if you’re a business owner? The complexity only gets worse.
One of the most challenging, yet essential, aspects of filing as a business owner is understanding which self-employed tax deductions you qualify for.
If you claim deductions that you don’t actually qualify for, the IRS could come after you for tax fraud. But if you don’t claim deductions that you do qualify for, you’re essentially leaving money on the table.
Now, you may be thinking, “Well, I don’t own a business.” But the government may not see it that way.
Have you worked as a nanny for anyone in the past year?
Have you provided tutoring services?
Are you an Uber driver?
Have you taught a small scale class from your home, such as providing music lessons or art lessons?
If so, you are self-employed. Uncle Sam considers you to be a small business owner. You may be required to pay taxes on your income. You’ll likely need to file a
But there is good news. Usually, self-employed people can deduct a lot of their business expenses from their tax returns.
Here are just a few of the businesses expenses you can deduct from your income to shrink your income tax bill:
1. Home Office or Office Space
If you use a portion of your home primarily as a home office, you can deduct this expense based on a percentage of your rent or mortgage used for your home office.
Similarly, if you rent a small office space, you can deduct the entire amount of your rent expense from your income.
2. Health Insurance
Do you have to pay for your own health insurance plan? If so, you can deduct the entire cost of your health insurance premiums from your income.
3. Car Expenses
If you use your car for work regularly (for example, if you’re an Uber driver), you can deduct the cost of using your vehicle.
There are two options for the vehicle usage deduction. You can either deduct based on the standard mileage rate—$0.58 cents per mile.
Or you can deduct based on the actual expenses you paid using your car for work (repairs and maintenance, insurance, oil changes, etc.).
The vehicle usage tax deduction is tricky. Click here to learn more about how to use it correctly.
Are you subscribed to a service to benefit your business? You may be able to deduct the expense from your taxable income.
For example, suppose you run a marketing or web design business from home. If you are subscribed to Audible and download audiobooks every month to improve your business on topics like:
- Business management
- Or finances
You can deduct the subscription from your income as long as it is used solely for business purposes.
Other subscriptions you can deduct are:
- Online learning platforms such as Udemy, Masterclass, or Skillshare
- And other similar subscriptions
As long as the subscription is used primarily for your business, you can deduct it from your tax return.
5. Office Supplies, Furniture, & Other Items
Anything you purchase intended solely for office use is tax deductible.
- Pens, pencils, staples and stapler, thumb drives, business cards, etc.
- Printer, ink cartridges, printing paper, etc.
- Your desk, office chair, desk organizer, and other furniture items
- And more
The important thing to remember is that the items purchased must be intended and used for your office.
In other words:
Typically, you probably won’t deduct the expense for purchasing a laptop or phone. That’s because you likely use these items for both personal and business usage.
If you need help filing your taxes this year, please reach out to Midwest Finance. One of our tax experts would love to work with you.