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When you are self-employed or freelance outside of your day job, there are additional taxes you need to navigate. While this sounds like (and often is) a killer headache, you also have the opportunity for unique tax breaks. There are plenty of significant deductions you don’t want to miss out on as a freelancer filing self-employment taxes. Here’s what to know about the major self-employment tax deductions you can take advantage of in 2023.
Home office deduction
If you’re your own boss and your home is your office, you can deduct a portion of your mortgage or rent. You can also deduct home-related costs like property taxes; the cost of utilities, repairs and maintenance; and similar expenses.
What you have to do is calculate the percentage of your home’s square footage that you use “exclusively and regularly” for work. Check out IRS Publication 587 for a lot of scenarios of what this might look like. There’s also the simplified option to deduct $5 per square foot of home used for business, up to 300 square feet.
Professional development
Further your expertise and take advantage of tax deductions for “qualifying work-related education.” This includes the costs of things such as tuition, books, supplies, lab fees, transportation to and from classes—as long as the education “maintains or improves skills needed in your present work.” Review IRS Publication 970 for the requirements.
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Car mileage
If you need to drive to get your work done, you can deduct a little more than $1 for every two miles you put on your car. Add up all the miles you drove for business-related purposes in the tax year, then multiply that number by the IRS’ standard mileage rate. For 2022, this rate was 58.5 cents per mile for the first half of 2022 and 62.5 cents per mile for the remainder of the year. Then you can deduct that total. Like with all things taxes, make sure to keep a record of your mileage. You’ll need it if you’re audited.
Travel costs
Like with your mileage, you can deduct all sorts of business travel costs. As long as you have a record that proves these expenses were necessary and exclusive to your work, you can deduct the cost of plane tickets, hotel rooms, car fares, and so on. Updated for the 2022 tax year, you can even deduct the full cost of meals. Even if you don’t have a receipt from each restaurant, you can use a standard daily meal allowance for food expenses. Check out IRS Publication 463 for more information.
Office supplies
Don’t pay for a single pencil that the government can pay for you. What counts as “office supplies” depends on your line of work, so look into deducting computers, software, and even newspaper subscriptions—as long as you can prove it’s legitimate and exclusive to your work.
Phone and internet costs
If you have a dedicated work phone or internet connection, those bills are deductible. And if you don’t have a dedicated line, you can deduct the percentage used for business.
Advertising
This one is a little tricky, but there is a line on your taxes dedicated to reporting your advertising expenses. The biggest issue is making sure you aren’t trying to deduct anything politically affiliated. Otherwise, in the words of the IRS, you can deduct advertising “to keep your name before the public if it relates to business you reasonably expect to gain in the future.”
Credit card and loan interest
You don’t need to have a business credit card. Check out your personal credit card statements, and you can deduct interest charges that accrued on business expenses.
Health insurance
Self-employed people might qualify for a tax deduction on their health insurance premiums. Unfortunately, the details are tricky. For instance, if you’re eligible to enroll in your spouse’s employer’s plan and chose not to, you can’t take this deduction. IRS Publication 535 has the details.
Self-employment tax deductions
Hey, the self-employment tax sure does count as business expense, right? You can deduct half of your self-employment tax on your income taxes. (Reminder: The self-employment tax is not the same as income tax.) For example, if you owe $1,000 in self-employment tax for the year, you pay that full amount when it’s due. But when you file your Form 1040, you can deduct $500 as a part of the self-employment tax deduction.
If this is your first time filing self-employment taxes, it’s definitely worth the money to make an appointment with a professional.
For more information check out the self-employed tax center from the IRS.
