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.

💲    Business set-up expenses
As you start out, you need specific equipment that’s considered a capital expense, because you will use it for more than a year. Examples include a computer and monitor, a laptop, desk, printers and more.
🔩    Upfront equipment expenses
When you set up your business any equipment you will use for more than a year is counted as a capital expense. Examples are cameras and tripods.
💻   Software
Computer programs or subscriptions to do your work, such as Photoshop, Dropbox, and Bonsai.
🏡   Home office costs
If your office is in your home, that portion of the square footage can be used as a deduction for expenses like mortgage interest or rent, utility costs, and home insurance.
✈️   Travel expenses
You can deduct the costs of airfare, train, bus tickets, and accommodations, if you have to travel for conferences, training sessions, or to meet clients.
🚗   Vehicle costs
If you use your vehicle in the line of work there are expenses like mileage, gas, parking, road tolls, repairs, maintenance, car insurance, and more that can be claimed as tax deductions.
📈    Marketing or advertising
If you advertise your services, have a website for your business, or print business cards or brochures, these can all be used as tax deductions for software developers.
✏️   Office supplies
You can deduct the cost of items like pens, notebooks, printers, printer cartridge and printer paper, or other office supplies.
📚   Ongoing training
If your profession usually require ongoing training as the industry continually evolves,  you can deduct conferences, classes or other training, including professional magazine subscriptions or online training.
👨‍⚖️   Sub-contractor or assistant
Perhaps you need special expertise for a project, or you need an assistant to help you with workload. That’s an expense at tax time.
🏥   Health insurance
Any health insurance related costs can qualify as eligible tax write-offs for software developers.
📱   Phone and internet
A lot of professionals definitely need a cell phone and Internet to do their work, so those are deductible costs.
📜   Licensing costs
Items like business association memberships, or professional associations, as well as business licenses are all eligible expenses.
💰  Affiliate commissions
If you're working with an affiliate system to promote you and your services, keep in mind that this type of marketing is tax deductible.
💵   Commissions & fees
Legal fees, payment processing fees (PayPal, Stripe, and others).
👨‍💻   Other expertise
If you hire an accountant or a lawyer, for instance, those costs that support your business could be tax deductible.
🌮  Meals
Business related meal costs are tax deductible, but keep in mind that the IRS has stricter restrictions around such expenses.
🧾  Unpaid invoices
Unpaid invoices are never fun, however, there is one good piece of news - all unpaid invoices can be written off at tax time.
📈 Depreciation
For any equipment you use for your business, general wear and tear can be evaluated and written of as a tax deduction.
🧰  Repairs
Any repair or maintenance costs involving the equipment you use for business is tax deductible.
🎗 Charitable deductions
Charitable donations made on behalf of your business are tax deductible. Make sure to include them!
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FAQs about Self Employment Tax Deductions

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.

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 Bonsai Expenses. Once you've recorded your expenses, you will need to analyze them to understand which are deductible and by how much.

Why should I keep a track of my 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

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

What qualifies as a business expense?

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.

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Tax Deductions for Self Employed Workers

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