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As a freelancer or self-employed individual, you manage your finances, including taxes. The IRS lets you deduct certain expenses, which can lower your tax bill and save you money. Tax deductions reduce taxable income. If you work as a freelancer or are otherwise self-employed, you may be eligible for some tax deductions that are not available to employees of other companies. Claiming the appropriate deductions might have a major effect on your overall tax liability. Let’s cover the biggest tax deductions for freelancers and self-employed people to help you save money and keep more of your earnings.
What Are Tax Deductions?
You can reduce the amount of tax that you owe by taking advantage of many types of expenses, one of which is a tax deduction. Tax deductions are expenses that can be deducted from your taxable income. For a business expense to be eligible for a tax deduction, it has to be both typical and required for the operation of the business.
Related: Taxes for the Independent Contractor: Deductions, Credits, and Forms Explained
Home-Office Costs
Freelancers and self-employed people can deduct home office expenditures. Rent, utilities, and internet for a home office may be deductible. Your home office must be utilized regularly and solely for work.
Business Costs
Business expenses are also tax-deductible. Equipment, supplies, and marketing are business-related expenses. Business expenses must be necessary and typical for your industry to be deductible.
Related: Top 15 Massive Tax Deductions and Write Offs for Businesses
Vehicle Expenses
Self-employed people can deduct vehicle costs. This includes fuel, maintenance, and insurance for your company vehicle. Use your vehicle at least 50% for business to qualify.
Travel Expenses
Freelancers can also deduct travel expenditures. Business travel expenses include flight, hotel, and food. The trip must be regular for your business.
Healthcare premiums
Self-employed health insurance is deductible. You may be able to deduct health insurance premiums if you pay for them. You must have company revenue and not be eligible for employer-sponsored health insurance.
Retirement Contributions
Finally, self-employed people can deduct retirement contributions. SEP IRA and single 401(k) contributions are tax-deductible.
Keep track of your deductible spending all year. Specifically, this refers to the maintaining of receipts and invoices for all costs associated with the business. To maximize tax deductions, consult a tax professional.
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