Self employed tax deductions are an important part of offsetting your extra income when filing your federal tax return. For example, if you are flying for business, one of the 7 Commonly Overlooked Tax Deductions is baggage fees!
An old business partner wanted to know what he needed to keep track of for his venture into self employment. I ran through the list of self employed business deductions I have used in the past to get him started.
Tax Deductions for the Self Employed
The tax deadline is just around the corner; many of you could also benefit from this information. This list is not a complete list, but rather the deductions that I routinely use. Most of the deductions are taken on Schedule C unless otherwise noted.
You can use TurboTax to enter your tax deductions yourself or you can provide the amounts to your tax accountant.
Self Employed Tax Deductions
- Internet Access. Both at home and in coffee shops that you work at for WI-FI access.
- Website Expenses. Fees paid to purchase domains, hosting, and other fees associated with running a website.
- Cell Phone. You cannot deduct the primary phone line at your house, but if you have multiple lines or a cell phone you use for business, the extra lines are deductible.
- Contract Labor. Independent contractor’s that you hire to complete work are not employees, but the payments can be deducted.
- Computer. Did you buy a new business laptop before December 31? If so, it’s deductible.
- Advertising. Advertising costs are deductible. This includes prizes for giveaways if you purchase the prizes.
- Credit Card Fees to Pay Taxes. If you use a credit card to pay tax (to earn a profit) you can deduct the convience fees you pay on business tax payments and on qualified personal tax payments.
- Tax and Accounting Software. Software you buy to keep the books for your business is deductible. I use Quickbooks.
- Filing Fees. You can deduct fees you pay to the state to maintain your business license.
- Postage and P.O. Box Fees. Don’t want your business mail going to your home address? Set up a P.O. Box and deduct the cost.
- Office Supplies. In addition to postage, you can deduct the cost of paper, pens, etc.
- Mileage. You can deduct business mileage on your personal car. Make sure you keep good records.
- Business Meals. Business meals are deductible at a rate of 50%.
- Retirement Contributions. Contributions to a Solo 401k or other qualified plan are deductible.
- Self Employment Tax. Half of the self employment tax you pay can be deducted.
- Home Office Deduction. If you work from home, you can deduct the costs associated with maintaining an exclusive home office on form 8829 as a Home Office Tax Deduction. You can include a portion of real estate tax, mortgage interest, insurance, maintenance, utilities, office furniture, casualty losses and depreciation.
- Health Insurance. Part of your self employed health insurance costs are deductible if you were not eligible to take part in an employer-subsidized health plan. However, to determine the amount, there is an iterative calculation if you also qualify for the Health Insurance Premium Tax Credit.
- Cost of Goods. If you are selling products on Amazon or any other platform, don’t forget to deduct the product costs when they are sold.
More Self Employed Tax Topics
- How to Calculate Self Employment Tax
- What You Need to Know About Tax Losses
- What is Schedule SE?
- 2017-2018 Tax Brackets
- Is Your Business Really a Hobby in the Eyes of the IRS?
- Do You Have to Pay Taxes on Extra Income?
- Tips for Filing Your Taxes with Self Employment Income