Are you a home-based freelancer or do you have a side hustle? If so, you know the benefits of being your own boss, including flexible hours and no commute – unless you count walking from your bed to your desk.
Yet, along with these perks comes a tedious task: filing taxes for your business. In fact, dealing with your taxes may be so daunting that you haven’t even started to organize your year-end books or figure out which tax deductions you can take. Luckily, you still have time and this is one task that is certainly worth it. Why? Tax deductions can lower the amount you owe Uncle Sam or perhaps net you a refund. Either way – this can mean more money in the bank for you. So, stop procrastinating and take a look at our top 9 tax deductions for freelancers.
1. Home office
If this marked your first year freelancing, you may not realize that you can deduct home office expenses even though you don’t have a separate “office” in your residence. Although a dedicated office is ideal, this may not be an option if you live in an apartment with roommates. Luckily for you, you can allocate a corner of your dining room or even your bedroom as your workspace. According to the IRS, you can deduct a portion of your rent or mortgage for the room or space that is used exclusively for business purposes. For example, the square footage of my home office equates to about one-eighth of the total square footage of my house. This means that I can deduct about 12 percent of my mortgage payments.
2. Home office supplies, equipment, and furnishings
Talking about a home office, you can also deduct expenses related to the purchase of home office supplies and computer equipment. This includes office furniture like a new stand/sit desk – my big ticket office expense in 2016. I researched affordable electronic desks and purchased one for $669 at Ikea. But, guess what? It was money well-spent as my back fatigue is now gone plus I get to write it off as an office furnishings expense. Besides a new desk, other big-ticket office items may include an ergonomic chair, a printer, or a new laptop. And, don’t forget about smaller everyday office supplies like printer paper, notebooks, paper clips or anything else you need to run your business. These are all typically deductible too.
3. Utilities, wireless and other related services
Just like you can deduct a percentage of your mortgage or rent as home office space, you can usually do the same thing for utilities and other household bills. For example, you can typically deduct the portion of your electricity, gas, cable, wireless and cell phone bill used to conduct business. Just make sure you keep accurate records and remember: Your personal household bills are not deductible.
This is an expense that is often overlooked, especially if you’re a newly minted freelancer. Yet, if you have any type of insurance that extends to your business, it may be tax deductible. This can include insurance paid for liability, theft, worker’s compensation, malpractice, disability, and maybe even health insurance premiums. For example, I carry fitness liability insurance as I teach yoga classes on the side. When I used to operate a home-based yoga studio, I also had an umbrella policy, which offered my business an extra layer of protection above and beyond my homeowner’s insurance policy.
5. Automobile expenses
Do you drive your car to visit clients or meet prospective customers? Or, perhaps you rack up hundreds of miles driving for Uber or Lyft? Regardless of whether you’re a Lyft drive or a roving fitness instructor, if you put miles on your car for business, you can either claim the actual car expenses or deduct the standard mileage rate of 56 cents per mile during 2016, according to the IRS. If you decide to claim the actual expenses for your car, don’t forget to include gas costs for traveling to business-related events and meetings, as well as expenses related to oil changes and repairs.
6. Travel costs
If you traveled to meet with clients or to attend events, conferences and trade shows, you can usually deduct related hotel bills, airline travel, or other associated expenses. You can also deduct 50% of your business meals or entertainment, according to the IRS. For example, if you take a prospective client for lunch, you can normally deduct 50% of the restaurant bill.
7. Supplies related to your business
Do you run a craft business on Etsy? Or perhaps you have a side hustle refurbishing old furniture? Regardless of what type of business you run, if you sell merchandise, you can often deduct material costs. In addition, you can deduct the amount you spend on merchandise for your business. In my situation, I deduct the cost of yoga props and other fitness equipment that I use for my classes.
Did you create and print marketing materials for your business, including brochures, flyers, mailers or business cards? If so, these are typically tax deductible. In addition, you can usually write off costs for online advertising through platforms like Facebook, Twitter, and Google. And, don’t forget about paid email marketing using Constant Contact or other similar channels. This form of marketing is also a viable tax deduction.
9. Professional service fees
Did you hire a lawyer to help you incorporate or an accountant to handle your bookkeeping? If so, you can usually deduct these professional fees. You can also normally deduct fees for other professionals you hire for your business, including an SEO expert or graphic designer.
Regardless of which deductions seem appropriate for your business, it’s a good idea to seek advice from an accountant or financial advisor. And, keep this in mind: The cost to hire a tax expert may be tax-deductible. A win-win.