Tax Deduction Examples: Pro Tips for Keeping More of the Money You Earn

By Erin Ollila, Contributor, on January 1, 2018

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One of the reasons I took so long to start my own business was that I didn’t know how to handle self-employment taxes. I wasn’t sure how to pay quarterly taxes or what to deduct at the end of the year, and to be honest, I was a bit too anxious to find out.

Now, you may already know of some tax deduction examples that’ll work for you. Melissa Whaley, tax professional and financial strategist, says, “The most common deductions are software, computer equipment, marketing and job supplies. These will vary a lot depending on what type of freelancer you are, but almost everyone who freelances has deductions in these categories.” But there are also other, more obscure, deductions you should be aware of.

Here are seven deductions you may be eligible for as an independent worker:

1. Business Insurance

“A deduction that’s not utilized like it should be is business insurance, because too many freelancers don’t get insurance for their businesses,” says Whaley. Based on what I hear from other independent workers, I’d have to agree. Whaley continues, “I think this is such an important business expense to protect yourself as a business owner, and often [it’s] not as expensive as most people think.”

2. Incorporating

Thinking about whether you should switch from a sole proprietorship to an LLC? “If you incorporate (or, form an LLC) with your own money prior to actually operating the business, then you would do something called amortizing the start-up costs,” explains Whaley. “This just means that you break up the expense of getting your business operational over a few years rather than in one year. If you are operating as a sole-proprietor and decide to incorporate, you can usually deduct the cost in the same year.”

3. Marketing

How much have you spent this year advertising your business? Whether spending your hard-earned dough on physical products, like business cards or fliers, or online, in the form of Facebook ads, these marketing expenses are one of the most common tax deductions every independent business owner should jump on.

4. Meals

Be careful how you deduct your meals with clients. I often hear freelancers talk about how they don’t mind picking up the tab because they’ll deduct it all at the end of the year. Umm, no. That’s not exactly how it works. “If you take clients to lunch or coffee, then you can deduct 50 percent of that,” says Whaley. Don’t forget to keep a log of your meals and who you dined with — and keep those receipts. Pro tip: Scan the receipts and upload them to both the cloud and a backup storage device.

5. Mileage

If you’re driving around a lot for work, keep detailed notes. Whaley says, “If you work with clients locally, then mileage is going to be very important. The standard mileage deduction for 2017 is 53.5 cents [per mile], which can add up quickly.” Remember that the starting and ending points of your travel need to be your home, office or job location.

6. Professional Development

Conferences are my jam. If I had the money to attend one (or two) every month, I would. But those things are expensive. Whaley says, “If you’re taking online courses for business, going to freelancer conferences or taking continuing education for your field, you can typically deduct them as a business expense.” Like the rest of these tax deduction examples, be sure to classify everything correctly. According to Whaley, “if you’re going back to school for a degree or specific program, you would want to use education credits rather than business expense.”

7. Website

It’s crucial to have a website as an independent worker, and yours may be a possible tax deduction this year. Any cost you’ve incurred, such as hosting or domain fees, a rebrand, new site or any other maintenance fees can be used as a tax deduction. Maybe a website redesign is in store for you before the end of the year.

Finally, Whaley says, “Don’t be afraid to reach out to a tax professional. It’s our job to help and educate business owners.” Depending on your personal situation, there are many other deductions you may qualify for. Don’t be anxious about filing taxes like I once was. Consider investing in the services of a financial professional who can help you file accurately, while saving you as much money as possible.

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