Starting a new business is not easy, with so many tasks that demand the owner’s attention.
There are many start-up and daily operation expenses.
Fortunately, from a profit and loss point of view, as well as from a tax perspective, there are many tax deductions for independent workers in Schedule C, which reduces the net profit of the business and therefore the taxes to the earnings.
What is a Deductible Expense
Deductible expenses are defined in the IRS publication 535 as:
Those “ordinary and necessary” expenses of the business.
In this context, “ordinary” refers to what is a common and accepted expense for the industry.
For example, a medical doctor may legitimately buy an stethoscope, but a certified public accountant will not need it.
Instead, a “necessary” expense means that the expense is for something useful and appropriate for the business.
Although it does not mean that it is indispensable.
Many expenses – such as office supplies, accounting, payroll, printer paper and toner, postage, advertising, and insurance – are common to many businesses.
And while keeping track of these expenses may seem tedious or overwhelming, doing so has good benefits, because they reduce your taxable income.
Here are five benefits for small business owners, independent contractors or freelancers.
A tax deduction widely used by freelancers
Many types of advertising expenses are deductible, including advertising flyers, print and mail advertising, and business cards.
In addition, the expenses of other small businesses to promote yours can also be deducted as advertising expenses.
Also, in the digital age, money spent on advertising from Yelp, Facebook, or Google can also be deductible.
Following the order of ideas from the previous point, if your business has its own website, all costs associated with creating and maintaining are also deductible expenses.
Such costs may include the hosting service, the domain name, the page design, the purchase of software or the licenses for the images used.
As long as these expenses are for the exclusive use of the business, they are fully deductible.
Office at home expenses
If you use a portion of your home or property regularly or exclusively for business, you may qualify for the home office deduction.
The two requirements are:
- Make it the main place of your business.
- That you use it regularly and exclusively for business.
You can find out how to calculate this deduction here: Home Office Deduction and how to take advantage of it.
If you travel out of town for business, some or all of the costs may be business-deductible.
The cost of air, train, bus or car rental is deductible.
Lodging is also deductible, and business meals can be deducted 50%.
Other deductible travel costs are baggage fees, taxi payment, laundry service, business calls, as well as internet access.
We will not dwell too much on the details of these deductions, it will be the subject of our next blog post.
Self-Employed Health Insurance (SEHI)
Freelancers or self-employed often buy their own health insurance.
In addition to the insurance’s own health benefits, they also qualify for a deduction on your tax return.
If you fill out Schedule C as an independent contractor, sole proprietor, independent worker, or single-member LLC, your business is making a profit and you have no other health insurance, you can deduct the premiums for health insurance, dental insurance for yourself, your wife, and your your dependents under the age of 27.
You can also do it with long-term premiums.
Reduce your tax burden with us
If you are a self-employed or small business owner in the Washington Metropolitan Area who wants to get the most out of your tax deductions, then look no further.
At Global Tax we are your allies to reduce your tax burden as much as possible, so you can be sure that you only pay what is fair.
Contact us by calling (703) 533 – 3636 or send an email to [email protected]
If you liked this article, you may also be interested in reading: Five tax deductions that you may not have known