Tax season is here and even if you’re a procrastinator, don’t wait until the last minute – especially if you freelance or have a side hustle. Tax season can be a very stressful time for some people depending on how complex your situation is.
When it comes to preparing for your freelance or independent contractor taxes, preparation is key. Preparing in advance can help you eliminate common sources or stress and also give you enough time to map out which deductions and credits you can use.
As a freelancer, I don’t like how much taxes I have to pay. At the same time, taking advantage of deductions has helped me save a lot of money on my taxes. Below are some of the best tax deductions for freelancers and contractors.
*Please note that I’m not a tax professional and this article is not intended to serve as tax advice. Please check with your accountant for specific advice regarding your individual tax situation.*
Vehicle Mileage and Expenses
If you use your vehicle for a contractor job or travel to clients for meetings, you can consider deducting a portion of these expenses on your taxes.
My husband used to drive for Uber and Lyft and deducted his mileage for this when filing taxes. You can deduct mileage even if you do other gig apps like DoorDash, Postmates, and Instacart.
Any work you get done on your car during the year can also be considered for a deduction. Even the minor things like an oil change, any maintenance done on your car should be tracked and keep your receipt as proof.
Striving to gain more skills and experience in your field is often encouraged. Sometimes, this involves signing up for courses or training.
Be sure to deduct what you spend on professional development whether you attended a conference or purchased blogging course in the past year. You can also write off any membership or organization fees that you pay into each year as well.
If your work involves dealing with clients or customers, you might have paid for advertising and marketing services over the past year.
Paying for advertising can get expensive, but the good news is that you can often deduct this expense. For example, many bloggers and small business owners invest in Facebook advertising. The money spent on FB ads can be deducted on your taxes as a business expense.
Traveling for work is another expense that can eat away at your freelance and contractor income. I travel to a conference each year and spend around $1,000 on the whole ordeal.
What provides me with some comfort is that I can deduct what I spent on plane tickets and my hotel when I file taxes.
If you decide to take a potential client out for lunch this can qualify for a tax deduction. Meetings are essential to a successful business and sometimes it’s nice to make a connection or discuss something important over food.
Also, the cost food you buy at networking events like conferences can be deducted so long as it’s work-related.
Having a home office can cause you to have a few different expenses. Having the internet and a phone can be essential expenses that allow you to get things done.
If you have a home office that’s a separate enclosed room in your home, ask your accountant to let you know what type of deduction you can take for office expenses.
If you’re starting up a side business, you’ll need to get some supplies and materials. These costs are tax-deductible as well. Items like a printer, computer, and business cards are just a few of things that can be considered for a tax deduction.
You can also include printer ink, paper, and paper clips as well. Again, just be sure to keep your receipts and bank statements as proof of purchase. You won’t need every expense receipt to file your taxes, but it’s wise to store some documentation should the IRS ever ask you for it.
You can deduct website hosting and design costs on your taxes as well. If you make some changes to your site or are set up a brand new domain with hosting, you can count it as a business expense. Some hosting and website changes are good to do once in a while especially if you want to rebrand or do an overall update.
Take Advantage of Deductions
Doing taxes as a business owner or side hustler doesn’t have to completely drain your finances. Get smart and take advantage of some common deductions that can help freelancers and contractors save on their taxes.
Keep a detailed record of your expenses throughout the year and be sure to talk to your accountant or use a trusted tax filing software like TurboTax to check all your deductions.