Independent Contractor and Professional Tax Deductions

As a self-employed professional, keeping track of expenses can be complicated and confusing. However, understanding deductions and how they apply to your business are essential since taxes are one of your largest expenses. It can be difficult to understand which tax deductions you are entitled to.

Check out these 10 tax deductions and start tracking them today to lower your expenses when tax season rolls around:

1. Local Travel. Local transportation expenses can be deducted from taxes if they are necessary for business. It’s important to differentiate travel that’s personal from travel that is for business. Keeping an accurate chart of mileage with clear descriptions of each trip will add an extra level of protection.
2. Long Distance Travel. If you have the need to travel overnight for business, hotel costs, airfare, rental cars and meals can be tax deductions. Save receipts and make notes of the purpose of each trip.
3. Operating Expenses. Businesses have expenses that are necessary for day-to-day operations. These expenses can include supplies, equipment, office space rentals and more. As with all deductions, saving all receipts and keeping detailed records will prevent any problems should the need for an audit arise.
4. Home Office. If you work from home, you may be eligible for a home office deduction. This depends on the type of business entity you have. To be eligible for the deduction, your home office may not be used for any other purpose and must be your primary work space.
5. Office Space. If you rent or own an office that is outside of your home, you are eligible for specific tax deductions. Rent, insurance, repairs, maintenance and utilities are all applicable deductions for tax purposes.
6. Professional Services. Legal fees incurred to run your business along with tax preparation costs – for your business, not your personal income tax – are deductible.
7. Long-term Assets. Any business property that you expect to last for over a year – like furniture, digital equipment, specialized equipment, buildings, business vehicles and more – can be deducted for tax purposes. This can be done through depreciating these items over their expected lifetimes or as a one-time deduction.
8. Insurance. Because you are self-employed, you are required to carry independent health insurance. This counts as a tax deduction. Other health expenses that can be deducted include nonprescription medication, eyeglasses and contacts or other non-covered expenses.
9. Bad Debts. When a debt remains unpaid, it can be written off as a tax deduction in certain situations. It’s important to note that this is only available as an option for professionals who use the accrual method of accounting, not the cash accounting method.
10. Employee Costs. If you hire other individuals as part of your business plan, their fees can be considered business expenses. This includes any hourly rates or salaries.

Whether you’re just starting your own business or are looking for ways to improve your processes, consulting an experienced business lawyer, like Attorney Michael Hynum with Hynum Law, is recommended. Our team can answer questions and provide guidance during the setup process.

Call today to set up a consultation. We look forward to working with you.