Whether you’re just starting as a freelancer or already a seasoned 1099 employee, it’s often confusing to know what you can and cannot write off on your taxes. Most people understand the standard deductions for common expenses like phones and supplies. However, the IRS fine print is always changing, and it can be easy to miss some less-obvious deductions.
You likely have a stack of 1099s, a pile of invoices and receipts, and a bunch of concerns regarding whether you’re filing your taxes correctly. Make sure you store these important documents and track all of your expenses, even if it’s in a shoebox or envelope. Or, better yet, track them digitally in an app like RoamHR (get your free 30-day trial here). Centralizing all your annual invoices, taxes, and expenses in a single place can give you the peace of mind you need to stay on top of things.
To help you keep as much of your hard-earned pay as possible, we talked to three experts about some of the top deductions for freelancers — especially those that are often overlooked. According to CPAs Tim Cistone and Brandon Masters and attorney Demetrius J. Robinson, you’ll want to check if these deductions apply to each of your quarterly tax payments.
As a 1099 employee, your taxes look different than those with a W-2. When you’re self-employed, out-of-pocket expenses are common and really add up. Tracking all of your business-related purchases (and the use of your home in some cases) lowers your taxable income, meaning you keep more of your money.
Startup-related costs: These are costs accrued in the process of getting your self-employed business off the ground. You may be able to deduct the expenses paid to start your business, such as advertising, transportation, consultant fees, travel, employee training and wages, and legal and accounting fees.
- Did you take an Uber or Lyft to a client meeting, order a small batch of business cards, or print your proposal at FedEx? These are all examples of expenses you can deduct on your taxes. You can even write-off the RoamHR app, which automatically calculates your anticipated income.
Organizational costs of forming your business: Large purchases that are considered to be capital expenditures, such as money spent upfront to purchase or repair assets, may be deducted over time through depreciation or amortization.
- Did your laptop die, or is it on its last legs? Getting a new one is a business expense that you can write-off. Keep everything itemized and sorted by downloading the RoamHR app.
Mileage and auto expenses: This includes standard mileage rates, business-related tolls, parking fees and auto depreciation each year.
- Did you have to travel to a client meeting and pay for parking? All of that can be deducted from your taxes. Make sure you save those receipts from the parking and log your mileage. According to the IRS, deductible business mileage in 2019 is $0.58 / mile. We make tracking your mileage easy. Get your free 30-day trial here.
Business use of home expenses: You can deduct a portion of your housing expenses if you have a dedicated home office. These expenses include homeowners’ insurance, rent, repairs and maintenance, utilities and security systems.
- Is your home office 20% of the square footage of your home/apartment? Portions of your rent/mortgage, utilities, and internet can be deductions.
Health insurance: You can deduct the cost of your health insurance, but only if you are not a W-2 worker that gets insurance from another employer.
- You can deduct your health, dental and long-term care insurance premiums, as well as the cost of premiums that cover your spouse or dependent.
Self-employment tax deductions: Any 1099 worker is required to pay both parts of FICA (Federal Insurance Contributions Act) taxes. However, you can deduct half of those payments as self-employment taxes. Luckily, we instantly calculate a projection of your annual earnings so you always know how much you owe. Check out the RoamHR app.
Qualified Business Income Deduction: If you file your tax return as a sole proprietor, partnership or S-Corporation, you may be eligible for a deduction of 20% of your profit.
When you’re self-employed, figuring out deductions, tracking mileage and optimizing your finances often falls squarely on your shoulders. Not anymore: RoamHR manages all of your finances in one location and can help you get an instant raise. Our easy-to-use, easy-to-understand platform was created to put money back in your pocket. Get your free, 30-day trial of RoamHR here.