4 Tax Deductions for Freelancers and Entrepreneurs

Freelancing and entrepreneurship offer you independence and opportunities to pursue your goals outside of a traditional work environment.

Whether the work you do is a side hustle or your full-time career, working for yourself provides you with job flexibility, control over your own schedule, and additional income.

Working for yourself also means you are responsible for tracking your income and paying your taxes.

Here are four benefits and tax deductions that will reduce your tax burden.

Tax Deductions and Benefits

1. Legal and Professional Fees, Including Tax Preparation Services

If you hire a professional to help you with your business, the expense may be tax deductible.

For example, if you hired someone to help you write a contract, do accounting, or understand the legal ramifications of your business decision, you may be able to deduct the cost of paying for those professional services.

Tax preparation services are also deductible. A tax professional can help you properly account for your income and expenses. They may also help you find additional eligible tax deductions.

If you file your taxes yourself, the cost of using tax software is deductible.

2. Marketing and Advertising

Attracting clients by running ads or paying for sponsored posts is a tax-deductible expense.

In addition to online and social media advertising, business cards, brochures, and apparel that has your business name emblazoned across it are considered advertising expenses.

If the marketing and advertising expense helps you acquire new customers or helps you retain your existing customers, it may qualify for a tax deduction.

In short, any advertising that is directly related to your business may be tax deductible.

You may even be able to deduct the cost of hiring a marketing consultant.

3. Home Office

Do you have a dedicated space in your home where you regularly conduct business? If so, you may be eligible for the home office deduction.

The home office deduction is available to both homeowners and renters.

You may be able to deduct the cost of utilities, insurance, rent, mortgage interest, repairs, and home maintenance.

When calculating your home office deduction, you can use the simplified method or the regular method.

With the simplified method, you can deduct $5 for each square foot of your home office. If, for example, your home office is 150 square feet, you can deduct $750 (i.e., $5 x 150). Under the simplified method, the area you use to calculate your deduction cannot be more than 300 square feet.

With the regular method, your home office deduction is based on the percentage of your home that you use for business. You will need to track all of your home expenses and deduct the percentage of those expenses that are for home office use. If, for example, your office occupies 10% of your home’s square footage, 10% of your total utility cost will be tax deductible.

4. Travel Costs

If you have a vehicle that you use solely for business, you may be able to deduct the cost of the vehicle. Additional deductible expenses include vehicle registration, insurance, fuel, tires, and maintenance.

If you use your vehicle for both business and personal use, you will need to track your business mileage. Use the miles you travel for business to calculate your deduction.

Consider using a mileage app or another tracking method to help you keep accurate records.

In addition to vehicle costs, other business travel expenses such as air fare, cab fare, train tickets, lodging, and rental cars may be tax deductible. Note that the deductions only apply to business expenses. Personal travel costs, such as vacations, are not deductible.

No matter which deductions you use, keep good records. Track your expenses and save your receipts. If you are ever audited, you may need to provide evidence to justify your expenses.

You’re working hard to build your business. Take advantage of the benefits available to you.

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