If you’ve taken the leap and you’re hanging out a shingle as a self-employed software developer, it’s important to know how to take advantage of the benefits of being self-employed.
Knowing about tax deductions for software developers is important when it comes to maximizing the bonuses of being a freelancer instead of an employee. When tax time comes, you’ll be glad you had all the information you needed.
Some of the tax deductions for software developers may seem inconsequential, but when taken together they can add up to a big reward when it comes time to file your tax return.
Each of the software developer tax write-offs can reduce your taxable income, which means less taxes paid and more profit in your bank account. Tax deductions for software developers also help offset the cost of establishing and maintaining your business.
The federal taxing authority, the Internal Revenue Service (IRS), has a definition of business expense that guides what is deductible: an expense that is both ordinary and necessary:
Ordinary is a common and accepted expense in your trade or business, such as a computer for a software developer.
Necessary is a helpful and appropriate expense for your trade or business, which does not have to be indispensable. Ongoing training would be an example for a software developer.
As a self-employed software developer, it’s difficult to know all the software developer tax write-offs that can be a big benefit to you at tax time. Our list of tax deductions for software developers will help you know what to track and deduct as an expense. You can manually track your deductions with our 1099 expense spreadsheet.
While it’s good to consult with an expert like an accountant if you’re uncertain, here are the expenses that are eligible as tax deductions for software developers.
There are some expenses that cannot be used as tax deductions for software developers:
Now that you know about all the software developer tax write-offs, here’s how you can take advantage of them:
1. An online tool like Bonsai accounting and taxes.
2. File your own income tax return using the deductions.
3. Utilize the services of a paid accountant.
Remember, you can use Bonsai's free self-employed tax calculator to estimate your quarterly taxes!