It is wonderful to own your own business or be a gig worker, but when it comes to paying taxes, it can get confusing. One of the biggest questions people typically have is, “What can I actually deduct?” The good news is that the IRS allows both small business owners and gig workers to lower their taxable income in the form of deductions for the actual cost of performing their work.
Understand these deductions and save hundreds, and sometimes thousands, of dollars annually.
Let us take them one at a time and keep it straightforward.
- Home Office Expenses
If you have a room in your house that you just use for your business, then you may be eligible for the home office deduction. That could be a slice of your rent, electricity, internet, and cleaning. It must be used every day and only for business. If, for example, you’re employed by a rideshare company but you keep some of your living room area as an office to balance the books and plan routes, then the space is included.
- Travel and Transportation Expenses
Ride drivers and delivery drivers can expense mileage, gas, repairs, and even car washes. Use the IRS standard mileage rate or actual cost. Keep an app or notebook handy to track your miles. It makes tax time a breeze and has your back in case the IRS ever requires proof down the line.
- Tools and Supplies
Do you buy a new phone for your delivery app, business cards, printer ink, or software? They are tax-deductible. Anything that you use to run your gig or small business usually counts as a business expense. Keep receipts in hand. They can add up fast.
- Marketing and Advertising
Building a website, creating a business page, or placing an online ad, as well as printing flyers, are all deductible marketing costs. Hiring someone to design your logo or manage social media for you also qualifies.
- Education and Skill Development
If it is courses or training that are for your business, it is deductible. If a freelancer is taking a course online to become a better writer or learn a new program, it is a write-off.
- Health Insurance Premiums
If you are self-employed and not qualified to participate in another plan, you can normally deduct the premiums for the health insurance on which you pay for yourself, your spouse, and dependents. This can be a valuable deduction for direct-paying families.
- Business Meals and Client Meetings
If you’re buying a client lunch or coffee, you can write off 50% of the meal cost. Always write down the person you met with and for what purpose—you’re glad you did if they do audit you.
- Retirement Contributions
It is one that a number of gig workers tend to overlook. Making contributions to a SEP IRA or Solo 401(k) pre-pays you for retirement and reduces your taxpaying income. It is a smart move that costs upfront and pays in the future.
- Cell Phone and Internet
If you are doing business with your internet or phone, you are allowed to deduct the business aspect of the bill. If you utilize it 70% for business, you are able to then deduct 70% of the cost. It would be good to keep track of how you utilize it for business.
- Contract Labor
If you have employees for you—e.g., a virtual assistant, graphic designer, or part-time helper—you can deduct these payments. Always give a 1099 form when required.
Independent contractors and small business owners save tax dollars in different ways. Each deduction means less that the IRS needs to tax. Keeping yourself organized and knowing what you can deduct will save trouble down the road. Double-talk expertise isn’t necessary to hear about the fundamentals—just organize and keep receipts. The result is simple: pay what you owe, but one penny less.
See the video below of unbelievable deductions.
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