Top 10 Tax Write-Offs for Self-Employed Individuals

Being self-employed brings with it a lot of independence. You get to make your own choices and set your own hours. You work when you want to work!

But for better or for worse, that independence also means a lot more responsibility. You’re operating your own small business, and as a result, you’re responsible for your own income taxes and self-employed deductions in a way most working people aren’t.

If you’ve never paid or filed taxes as a small business owner before, there is a lot you should know before you get started. There are numerous ways you can bring down your overall taxable income and increase the money you get to take home. If you’re not taking advantage of these tax deductions for self-employed expenses, you'll be paying more than you should.

Eliminated or Changed Write-offs for Self-employed Individuals from the Tax Cuts and Jobs Act  

Small business taxes can be extra complicated because of how frequently the laws change. The tax code can vary significantly from one year to the next, meaning you have to relearn everything all over again. 

The 2017 Tax Cuts and Jobs Act changed a lot about small businesses; many deductions and credits were adjusted or removed entirely. 

Here are a few tax deductions that changed or went away because of the TCJA. 

• Personal and dependent exemptions are suspended. 
• The standard deduction was increased significantly.
• The child tax credit was increased.
• Deductions for commuting expenses are more limited.
• Job relocation moving expenses are no longer deductible except for active-duty military personnel. 
• Alimony expenses are no longer deductible and receiving alimony payments no longer counts as taxable income. 

10 Self-Employment Tax Write-Offs to Use

Here are ten valuable write-offs of business expenses for self-employed individuals you should include on your small business tax deductions checklist. 

1. Qualified Business Income Deduction

Every year, small businesses below a certain income level can deduct 20% of their qualified business income. QBI refers to your net income but excludes income related to capital gains, interest, or income earned outside the United States.   

2. Self-Employment Tax Deduction

As a self-employed individual, you have to pay a higher percentage of your income into Social Security and Medicare, for a total of 15.3%. However, you can claim a deduction for half of that. 7.65% of your self-employment tax can be claimed as a business expense and not counted for your taxable income. 

3. Home Office Deduction

Another significant source of savings is the home office deduction. However, simply working from home isn’t enough to claim this deduction. You must have a dedicated space in your home that is only used for your business, and it has to be a primary site for your work. 

If you’re eligible for this deduction, you can claim a portion of all your home-related costs as business expenses. You can deduct a portion of your rent or mortgage and other important home repair costs in proportion to the space of your home office. All of that is in addition to the costs of any office supplies or goods you use exclusively for work. 

4. Health Insurance Premium Deduction

If you’re not eligible for health insurance through your spouse, you can also count your health insurance premiums as a business expense. Effectively you are your own employer paying for your employee’s health insurance, so that cost should be paid with pre-tax income. 

5. Vehicle Use Deduction

Do you frequently use your vehicle for business purposes? Commuting costs don’t count here, but other work-related travel costs can be deducted, either for a company car or your own personal vehicle. 

To claim this deduction, you can either keep detailed records of your vehicle expenses or simply log the miles traveled for business purposes. The IRS has established a standard mileage rate for tax purposes, and in 2023, most businesses can claim a deduction of 65.5 cents per mile for business, medical, charitable, or moving-related travel.

6. Internet and Phone Bills Deduction

How much do you spend on internet and phone bills? These may also be deductible expenses as far as they’re used for your business. For a home office or a personal phone that you also use for business costs, you can deduct a fraction of the total cost based on an estimate of your relative business use.

On the other hand, you might have a separate phone used only for work or even a separate internet subscription. In that case, you can deduct the full cost of those bills as necessary expenses for your business.  

7. Meals Deduction

Under certain specific circumstances, you can deduct all or part of the costs related to meals or entertainment purchased as part of your work. If you take clients out for meals or bring food to your workplace to share with others, then those costs are 50% deductible. 

There are also a few meal-related costs that can be fully deducted. To be 100% deductible, it must be food or entertainment provided as part of a party for the entire company at once, or it must be something officially included as compensation for your employees for whatever purpose. 

8. Retirement Plan Contributions

Every year you’re permitted to deduct a significant amount of money for payments you make directly into your retirement plan. This allows you to defer paying taxes on that income until you withdraw that money later. 

It would be wise to max out your deductible retirement contributions before the end of each year, especially if you’re likely to find yourself in a higher income tax bracket. 

9. Interest

While the principal on many loans can’t be deducted, you can deduct the interest on loans, including your home mortgage, even if you don’t have a home office.

10. Education

The IRS sees continuing education as a regular and necessary part of the job. Any money you spend to help you do your job better or keep up with industry developments is money you can deduct for education expenses. 

This also covers any fees you pay for professional publications or association memberships. 

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