What Freelancers Can Deduct From Their Taxes in 2023
If you are self-employed or freelancing outside of your main job, you need to consider additional taxes. While this sounds (and often is) a killer headache, you also have the opportunity to receive unique tax breaks. There are many significant deductions that you don’t want to miss out on being a self-employed tax freelancer. Here’s what you need to know about the top self-employed tax deductions you can take advantage of in 2023.
Home office deduction
If you are your own boss and your home is your office, you can deduct some of your mortgage or rent. You can also deduct home-related expenses such as property taxes; the cost of utilities, repairs and maintenance; and similar costs.
What you need to do is calculate the percentage of square footage of your home that you use “exclusively and regularly” for work. Check out IRS Publication 587 for many scenarios of what this could look like. There is also a simplified $5 per square foot deduction for a home used for business up to 300 square feet.
Professional Development
Expand your experience and take advantage of tax deductions for “qualifying vocational education”. This includes spending on things like tuition, books, supplies, lab fees, transportation to and from class – as long as the education “supports or enhances the skills needed in your current job.” See IRS Publication 970 for requirements.
Car mileage
If you need to drive to get your job done, you can deduct just over $1 for every two miles you drive your car. Add up all the miles you drove for business purposes in the tax year and then multiply that number by the standard IRS mileage allowance . In 2022, that rate was 58.5 cents per mile in the first half of 2022 and 62.5 cents per mile for the remainder of the year. You can then subtract this amount. As with all taxes, remember to keep a record of your mileage. You will need it if you pass the audit.
Travel expenses
As with mileage, you can deduct all types of travel expenses. If you have records showing that these expenses were necessary and related solely to your work, you can deduct the cost of airfare, hotel rooms, car costs, 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 the standard daily allowance for food expenses. See IRS Publication 463 for more information.
Office tools
Don’t pay for one pencil that the government might pay for you. What counts as “stationery” depends on your line of work, so look to deduct computers, software, and even newspaper subscriptions – if you can prove it’s legal and applies solely to your work.
Phone and internet costs
If you have a dedicated work phone or internet connection, these bills are deductible. And if you don’t have a dedicated line, you can deduct the percentage used for business.
Advertising
It’s a little tricky, but there’s a line in your taxes dedicated to reporting your ad spend. The biggest issue is making sure you’re not trying to deduct anything politically related. Otherwise, according to the IRS, you can deduct advertising “to keep your name in front of the public if it is related to a business that you reasonably expect to get in the future.”
Credit card and loan interest
You do not need to have a business credit card. Review your personal credit card statements and you can deduct interest charged on business expenses.
Medical insurance
Self-employed people can claim a tax deduction on their insurance premiums. Unfortunately, the details are complex. For example, if you are eligible to enroll in your spouse’s employer’s plan but choose not to, you cannot use this deduction. IRS Publication 535 has the details.
Tax deductions for self-employment
Hey, self-employment tax really counts as a business expense, right? You can deduct half of the self-employment tax from income tax. (Reminder: Self-employment tax is not the same as income tax.) For example, if you owe $1,000 in self-employment tax for a year, you will pay that amount in full by the due date. But when you file Form 1040, you can deduct $500 as part of the self-employed tax credit.
If you’re filing a self-employment tax return for the first time, it’s definitely worth paying the money to make an appointment with a professional .
For more information, check out the Self-Employed Tax Center from the IRS.