As an architect working on various projects, you will have to pay different taxes - which brings us to the question, what can an architect deduct from taxes? If you are employed at an architectural firm, the chances are that they will handle your taxes.
However, when you are self-employed, you have to deal with these taxes yourself. Luckily, some of them can be deducted, allowing you to save on your business expenses.
Note: The best way to reduce your tax bill is by using an automatic expense tracker like Bonsai Tax. Bonsai Tax scans your credit card/bank statements to discover potential tax write-offs. The majority of users save ~$5,600 from their tax bill. Try a 7-day free trial today.
Tax Deductions Architects Can Claim
Here are some of the taxes that you can deduct as a freelancing architect.
Business Travel Expenses
If you have to go to locations across the state or the country, then you may also deduct travel expenses. This type of tax deduction can include hotel stays, plane tickets, parking fees, as well as travel meals.
For instance, if your projects take you far away from home, causing you to stay overnight, then you may deduct the food based on where you eat.
Restaurants are generally 100% deductible, while grocery stores and fast food shops are 50%. For instance, if you buy a hamburger before your flight home at the airport, then you may deduct 50%.
If you meet with your clients or other people to discuss business, those meals may also be deductible. For the most part, meals were only 50% deductible. However, as of 2021, meals started being 100% deductible - especially if the meal is taken in a restaurant. Read our full guide on the business meal deduction.
Education and Training
Education and training are also considered business expenses, which means you can deduct them as well. This includes training courses such as first aid, computer skills, UHS, or project management.
You may also claim educational tax deductions for stationery, books, or other tools needed for your study. Courses run by universities can also be deducted, but only if they are the self-education kind.
Workplace utilities and office supplies can also be tax deductible. For instance, if a good part of your work is conducted at your home office, you may deduct things such as office equipment, rent for the room, and many more.
If you made your workspace energy efficient, you may also claim tax credits for that. The tax law states that if you use less than 50% of what the average International Energy Conservation Code (IECC) Standards of 2006 were, then you may claim a tax credit up to $2,000.
If you have to pay for a business expense but your current adjusted gross income does not allow you to do it, then you can take out a business loan. If you do, then you may also qualify for tax credits.
For you to receive the tax credit, at least 60% of the amount you received should be paid on wages. PPP loans were specifically excluded from the taxable income section, but as of 2021, they qualify as a tax deduction as well.
Other useful tax deductions for architects include reference materials. Not only does this include physical materials and data, but you can also add hardware and software to the mix.
For instance, if you are using software to backup your information and invoices from programs such as Bonsai, then you may get a deduction for that. Make sure to save the receipts (something that also applies to other deductions).
While you may not be able to claim tax deductions for the entire self-employment tax, you will at least get half. You are practically deducting the half that your employer used to pay.
With this tax, you will pay 15.3% of your earnings. This means that when you get your tax return, you will get 7.5% of that amount back.
When you just start a business, you will have certain expenses that you will need to cover. The actual expenses can be different, going from office supplies to the costs of filing certain documents. For instance, if you are planning to open your own office in a government building, you'll have to pay a startup fee to settle yourself there. Start-up fees are fully deductible.
If you use a vehicle for business purposes, whether it's a regular car, truck, or van, then you may get tax deductions for it as well. This includes insurance, gas, as well as services. Individual expenses may also be claimed - for example, an oil change.
Software may also be deducted. As of 2016, you are allowed to deduct up to $2,500 in terms of software expenses. If the software or software suite costs more than $2,500, then it will be subjected to business depreciation.
This can be very helpful if you are using architecture apps or even invoicing and finance apps such as Bonsai's online freelance tool suite. If you have a premium plan, this can help you in the long run.
Costs of Sold Goods
As an architect, you may need to oversee the use of certain products throughout the construction project. These products may be claimed as tax deductible.
With that in mind, there are some things that you must keep in mind. For instance, if your business produces these goods, then you may deduct the costs of some of the items. However, labor costs cannot be deducted using wage or salary deductions.
Tools and Equipment
If you work at an engineering firm and need to invest in equipment for the job site, then you may also claim tax deductions for architects. Bear in mind that if the costs for these products go past $2,500, then they will be subjected to bonus depreciation.
Advertising and Marketing
Many businesses bring their work online, so if you are doing your own advertising and marketing, then you can deduct these expenses. This includes business cards, website development, domain costs, and many more.
If you are spending money on Yelp, Facebook, Google AdWords, or other similar platforms, you may also deduct these taxes. Plus, if you are doing campaigns through magazine ads and postcards, these can be deducted as well.
Insurance costs can also constitute legal tax deductions for architects. This includes anything from health insurance to liability or car insurance.
For example, you may get deductions for your general business coverage insurance, or you may get them for business vehicle insurance. The condition is that you need to prove that you are a sole proprietor and that the insurance is specifically needed for business.
If you have employees joining you at the job sites, then you may claim payroll taxes. Certain taxes such as the state employment tax or FICA must be paid out of your pocket, but you can easily deduct them if you run a small business as an architect.
Your work clothes can also be deducted during tax season. This includes anything from work pants, jumpers, shirts, jackets, and more. The condition for them to be tax deductible is that they need to be part of your uniform - which means that there should also be a business logo somewhere.
You can deduct the costs of laundry, repairs, and dry cleaning of your work clothes. Protective equipment such as masks, gloves - even sun protection items - are deductible.
Once more, if you have employees to which you need to provide benefits, then you may deduct those benefits. This can include anything from insurance, retirement plans, vacation days, sick days, and transportation benefits.
The Bottom Line
As an architect, you have the same advantages as other self-employed people: if the expenses are made for your business, then you may deduct them. Just make sure that you write them off correctly so that you do not trigger an audit. Review our architect accounting software options to help you file your taxes. Hopefully, our tax tips were helpful for you.