Making the Most of Your Taxes
Dipping your toes into the entrepreneurial waters by deciding to work for yourself or taking on a side-job in addition to your regular 9-5 can be oh-so-exciting!
It can also feel a little confusing come tax time.
The first thing to remember is that it doesn’t matter if you’re a full-time freelancer or do some projects on the side; if you made over $400 last year, you need to file a 1040. You should get a form 1099 from anyone who paid you $600 or more to perform a service. If you earned less than $600, you might not receive the form from them, but you’re still responsible for reporting your income.
The moment you decide to work for yourself, you become eligible for a wide range of tax deductions. So, don’t be afraid to claim what is yours!
Follow this list to make sure that you’re not missing anything:
Advertising and marketing expenses.
This includes your website, social media campaigns, or traditional advertising and business cards.
This includes anything available off the shelf, like Adobe. Even the cost of your computer can be deducted…if you bought it for work.
The cost of supplies.
Think necessary office items like printer paper, ink cartridges, etc. This can also include bigger things like office furniture!
Tools and equipment.
Depending on what it is, you may be able to deduct the full cost of your equipment in one year or depreciate it over time.
If you meet with clients over lunch, you can deduct 50% of your tab.
Cosmetologist or real estate agent? This one’s for you.
Keep track of the miles you traveled for work, specifically. The IRS lets you deduct 54.5 cents for every mile you drove on the job.
The chances are that you’re using the same phone for work and personal use. The IRS will let you deduct the portion of your phone expenses that are related to business only. So, if you use your phone 50% of the time for personal use and 50% of the time for business, deduct 50% of your bill.
Did you attend a seminar that’ll help you in your business? Are you taking classes to improve your skills? Courses and seminars that are necessary to help you do your job are absolutely deductible.
Retirement and health care contributions.
Pay into your IRA and deduct up to the full contribution limit. It’s a win-win situation. You can also deduct health insurance premiums. When you don’t have insurance through an employer, you are paying those premiums yourself. The IRS lets you deduct them…so do it!
A huge question lots of people have is whether or not they can deduct their home office. Let me break it down for you: the space has to be dedicated for work use only, and you have to use it regularly for business. So if you do your work at the kitchen table, but also eat meals there with your family (aka shared space), that doesn’t count as a home office. If you play by the rules, you can deduct $5 per square foot of home office space.
And finally! As more and more of us are joining the gig economy and flexing our side-hustle muscles, there is a huge new tax break for you as a small business this year. Sole proprietorships, LLCs, S-Corps, and Partnerships may deduct up to 20% (yes!) of qualified business income on their federal income tax return.
This post is sponsored by TaxSlayer®