Posted by Tiffany Gaskin

Tax Deductions for the Independent Contractor

Tax Deductions for the Independent Contractor

An independent contractor is a business owner as well, like a sole proprietor.

As a result, you get the liberty to structure your schedule and create a career path for yourself. While this might seem overwhelming, many people do not mind this career path. 

Unlike full-time employers who have their taxes removed from their paycheck automatically, an independent contractor is responsible for sending estimated tax payments to Uncle Sam. 

The good news, however, is that you need not pay tax on every money you earn. Since you are a self-employed contractor, there is a 1099 form for you, and you will pay taxes on what you earn minus the cost of conducting your business. 

There are a series of deductions one can claim while filing taxes. Since you are an independent contractor, you will have some deductions that will bring down what you will eventually pay as your taxes. 

This article sheds light on various categories of expenses you can write off as independent contractors.

 

  1. Home Office

There might be huge expenses that come from having a home office based on your line of job. You can use your home as your office, yoga studio, storage for equipment, and many others. 

As long as you use your home office area exclusively for working and it is your main business place, then you can calculate your tax deduction for this category. 

One can consider direct expenses like painting, renovations, and other indirect costs like utilities, insurance, and property tiles. 

To determine what you will write off as your home office, you can go through the easy route, which considers $5 for every square foot up to three hundred square feet, giving a maximum of $1500.


  1. Expenses for Education

Education is a pretty important factor for developing your business and getting new customers.

You can deduct educational expenses during tax like virtual conferences, webinars, books related to business, professional publications, etc. are potential deductions.


  1. Equipment and Property Depreciation

You will likely buy some equipment and properties for the business. As time goes on, these items will lose value. This explains why a Macbook laptop you got four years ago will not be sold at the same value in principle known as depreciation. 

Uncle Sam specifies that if business equipment lasts over a year, one can write it off as depreciation of the value on the tax return. You can also deduct repairs on properties you used for business purposes.

 

  1. Business trips

Are there client meetings or workshops that you had in another state? Uncle Sam allows for the deduction of an airline ticket, hotel expenses alongside half of your meals regarding business trips. 

Even if the trip is extended to travel long after your business commitment, those can come into your travel costs. However, be sure that you do not have too many leisure days that exceed the number of business days.

As an example, you might fly from Texas to Hawaii for a three-day workshop on fishing. It is possible to extend such trips for an extra two days to tour various beaches and lakes in Hawaii. You can deduct half of the cost of accommodation and meals for the two additional days as well.


  1. Health Insurance

Your entire health insurance is one of the various deductible expenses for independent contractors you can have on your 1099. Alongside the health insurance premiums, you can write off other health-related expenses like nonprescription medications, glasses, etc. Your spouse also could get some additional benefits.


  1. Mobile Phone

Do you use a single mobile device for both business and personal needs? It is possible to write off part of your phone bill every month. Like the home office deduction, you need to determine the portion of your mobile device used as business versus the one used for personal needs. This percentage can be removed on your 1099.

 

  1. Business Insurance

With business insurance, you get an extra protection blanket that keeps you from unplanned expenses like mistakes or business accidents. For instance, you might miss deadlines sometimes, which could cost a client. You can cover these claims using a professional liability claim. 

Also, there are cases when some clients might demand an insurance certificate before hiring you or even signing a contract. 

Any expense you incur on the insurance coverage for business can be deducted on your 1099 form. 


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Tiffany Gaskin
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