Self Employment Tax Deductions

Last Updated August 31, 2020

Common Self Employment Tax Deductions

Below is a list of common expenses that most self employed 1099 workers can deduct from their taxes. As with anything financial or tax-related, there is some nuance to what and how much you can write off, so be sure to consult with an expert.

🚗    Gas and mileage
Transportation and associated costs going to and from work-related places, such as client meetings or research trips.
💻   Software
Computer programs or subscriptions to do your work, such as Photoshop, Dropbox, and Bonsai.
🔌   Utilities (internet, etc)
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✏️    Office supplies
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📱    Cell phone & service
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🎓    Education
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What are self employment tax deductions?

If you have filed your taxes before, you may gave noticed that you have "write off" or deduct certain expenses from your taxes to reduce your overall tax burden. One of the silver linings of 1099 self employment is that your work allows you to write off or deduct even more expenses that are specific to your work. This will reduce your overall tax burden and help save you money as a self employed worker.

What are some examples of self employment tax deductions?

The guide below goes into more detail on self employment tax deductions, as well as breaking them down by work type (e.g., freelance marketers, designers, etc). However, as a general rule, many things you pay for to do your work can be written off. For example, did you drive your car to a client meeting and then pay for lunch? Then both the mileage as well as the meal can be at least partially deducted. There are various rules about what can be deducted and what percent of the expense can be deducted.

How can I take advantage of self employment tax deductions?

The short answer is to just start tracking what you spend money on as a self employed worker and understand what can be deducted. You can use something as simple as a shoebox for receipts, pictures on your phone, or more advanced expense trackers like Expensify or Bonsai Expenses. Once you've recorded your expenses, you will need to analyze them to understand which are deductible and by how much.

Track Your Revenue and Expenses

Self-employment taxes are not based on your gross income, but on your net profit. That's why it's crucial to keep track of how much you spend on business-related expenses. If you don't, you might miss out on all sorts of deductions. And those deductions could dramatically lower how much tax you owe.

It's best to start right away. Keep your records updated throughout the year, rather than scrambling to calculate everything last-minute when a payment is due. You've got enough to worry about when you're running your own business, so give yourself a break and keep those books tidy.

“Make sure you keep track of your receipts and expenses on the regular. There's nothing more headache-inducing than waiting until the 11th hour to get your expenses in order. Plus, it will just lead to a greater chance for error.”

Jackie Lam, personal finance writer

Blogger at HeyFreelancer.com

Using a cloud-based system like Bonsai can help to automate the process and keep you organized. This saves you not only a whole bunch of time, but also a whole bunch of headaches. No one likes searching through a mountain of old receipts and scattered invoices. If you put a system in place early, then when tax time comes around, you'll have all your information ready to go.

Personally, I make it a point to balance all my numbers once a week, usually on Friday when I'm winding down and almost ready to hit up happy hour. However, you can use apps to link your bank and debit card transactions to your accounting system, rather than entering every single number by hand. It's all about finding a system that works for you — and then sticking to it consistently

Business vs. Personal Expenses

So, what qualifies as a business expense? Well, it really depends on what you do and how you work.

Everything from software to staplers might be on the list if they're key to running your business. These days, we freelancers use a lot of digital tools to get our work done, so these are also something to track. Whether it's design software, project management platforms, or just a basic website, don't take any of this for granted.

As independent workers, we don't get the perk of a shiny benefits package. Because of that, health insurance premiums can also be included as part of your business expenses. Even certain vehicle-related costs can count.

Do you work from home? You might be able to deduct part of your rent. I have a section of my home that is 100% set aside for work, including a dedicated desk that I only use when I'm on the freelance clock. The square footage of that particular area gets deducted.

"One thing freelancers should do better is to separate personal and business money.  A. It’s easier to track, and nothing slips through the cracks, and B. It takes less time to deal with, so you can spend more time earning money.”

Eric J. Nisall, Freelancer Tax Expert

Some items, of course, fall into a bit of a gray area. For instance, you very likely have a computer that you use for both business and personal needs (I know I do). It just makes more sense, most of the time, than having two separate machines. In that case, figure out what percentage of the time you use your computer for work, and what percentage you use it for your personal life. The business portion of the cost can be considered a deductible expense.

Common business expenses

  • Website domain and hosting
  • Software, apps, and online services
  • Business cards
  • Office supplies
  • Business meals
  • Phone and internet service
  • Online classes
  • Accounting service
  • Vehicle expenses
  • Health insurance
  • Travel
  • Postage
  • Computers, laptops, and tablets
  • Home office space
  • Membership dues
  • Legal services
  • Payment transaction fees
  • Retirement plan contributions
  • Events and conferences
  • Tax preparation

Tax Deductions for Each Self Employed Work Type

Below is a list of common expenses that most self employed 1099 workers can deduct from their taxes. As with anything financial or tax-related, there is some nuance to what and how much you can write off, so be sure to consult with an expert.

🖼    Tax Deductions for Designers
📈    Tax Deductions for Marketers
👩‍💻    Tax Deductions for Developers
📷    Tax Deductions for Photographers
🎨    Tax Deductions for Freelance Artists
📰   Tax Deductions for Journalists
✍️    Tax Deductions for Writers