{"id":1081,"date":"2024-01-02T02:55:00","date_gmt":"2024-01-02T02:55:00","guid":{"rendered":"http:\/\/www.irstaxapp.com\/?p=1081"},"modified":"2024-02-02T03:57:17","modified_gmt":"2024-02-02T03:57:17","slug":"self-employment-deductions-tax","status":"publish","type":"post","link":"https:\/\/www.irstaxapp.com\/self-employment-deductions-tax\/","title":{"rendered":"25 Self-Employment Deductions Every Entrepreneur Should Check &#038; Claim"},"content":{"rendered":"<div class=\"wp-block-image\">\n<figure class=\"aligncenter\"><a href=\"https:\/\/www.irstaxapp.com\/self-employment-deductions-tax\/self-employment-deductions\/\" rel=\"attachment wp-att-1090\"><picture><source srcset=\"https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-deductions-600x314.webp 600w,https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-deductions-300x157.webp 300w,https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-deductions-1024x536.webp 1024w,https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-deductions.webp 1200w\" sizes=\"(max-width: 1200px) 100vw, 1200px\" type=\"image\/webp\"><img src=\"https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-deductions.jpg\" height=\"628\" width=\"1200\" srcset=\"https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-deductions-600x314.jpg 600w, https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-deductions-300x157.jpg 300w, https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-deductions-1024x536.jpg 1024w, https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-deductions.jpg 1200w\" sizes=\"(max-width: 1200px) 100vw, 1200px\" class=\"wp-image-1090 sp-no-webp\" alt=\"self employment deductions\" decoding=\"async\" loading=\"lazy\"  > <\/picture><\/a><\/figure><\/div>\n\n\n<p>Knowing about these twenty-five <em>self-employment deductions<\/em> will immensely help you save on taxes if you carry any trade or business, whether full-time or part-time, contractual or otherwise. The Internal Revenue Code taxes your income differently than a person drawing salary or wages for employment with any other person. So, the deductible expenses and deductions allowed to a self-employed person are quite different than those of an employed person. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Where do you claim self-employment deductions?<\/h2>\n\n\n\n<p>Schedule C of Form 1040 pertains to freelancers, gig economy workers, or carrying on a business, as this annexure to Form 1040 is for\u00a0reporting income or loss from a business. Part II of Schedule 2 to Form 1040 for 2022 has nine major fields that incorporate the following 25 types of expenditure as deductions from gross business income. See the screenshot<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><picture><source srcset=\"https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-income-1024x375.webp 1024w,https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-income-300x110.webp 300w,https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-income-768x281.webp 768w,https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-income-150x55.webp 150w,https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-income-750x275.webp 750w,https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-income-1140x418.webp 1140w,https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-income.webp 1313w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" type=\"image\/webp\"><img src=\"https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-income-1024x375.png\" height=\"375\" width=\"1024\" srcset=\"https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-income-1024x375.png 1024w, https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-income-300x110.png 300w, https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-income-768x281.png 768w, https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-income-150x55.png 150w, https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-income-750x275.png 750w, https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-income-1140x418.png 1140w, https:\/\/www.irstaxapp.com\/wp-content\/uploads\/2017\/12\/self-employment-income.png 1313w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" class=\"wp-image-5654 sp-no-webp\" alt=\"self employment deductions\" decoding=\"async\" loading=\"lazy\"  > <\/picture><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\">Video on expenses that count for self-employment deductions<\/h2>\n\n\n\n<figure class=\"wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio\"><div class=\"wp-block-embed__wrapper\">\n<div class=\"jeg_video_container jeg_video_content\"><iframe loading=\"lazy\" title=\"25 Self Employment Deductions for 2022\" width=\"500\" height=\"281\" src=\"https:\/\/www.youtube.com\/embed\/07JmbB8WK_E?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" allowfullscreen><\/iframe><\/div>\n<\/div><\/figure>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\">List of 25 Self-Employment Deductions<\/h2>\n\n\n\n<h3 class=\"wp-block-heading\">1. Advertising Expenditure<\/h3>\n\n\n\n<p>if you have spent or paid for any advertisement for your business purpose, you can deduct the expenditure.\u00a0 Any materials for marketing your business () and the cost of developing those (e.g., agency or designer costs).<span style=\"text-decoration: underline; color: #3366ff;\"><em>[Where to find on Schedule C: Line 8 ]<\/em><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><em>2<\/em>. Commissions and Fees<\/h3>\n\n\n\n<p>If any other person generates your sale and you pay a percentage, such payments, whether known as commission or brokerage, or fee is your business expenditure. It is fully claimable\u00a0 <span style=\"color: #3366ff;\"><em>[Where to find on Schedule C: Line 10 ]<\/em><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">3. Business Insurance Premium<\/h3>\n\n\n\n<p>You need insurance to protect your business from fire, theft, flood, malpractice, errors and omissions, general liability, etc. Such expenditure is a deductible expense<span style=\"color: #3366ff;\"> <em>[Where to find on Schedule C: Line 15 ]<\/em><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">4. Vehicle Running Costs<\/h3>\n\n\n\n<p>Any expenditure on a car or another vehicle you use for business is fully allowable. So, accounting for expenses like gas, insurance, registration, repairs, and maintenance of cars and motors used for business purposes is necessary for claiming vehicle running costs as deductible expenditures. <span style=\"color: #3366ff;\"><em>[Where to find on Schedule C: Line 9 ]<\/em><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">5. Loss or Depletion<\/h3>\n\n\n\n<p>In certain types of businesses, like the distribution of oil, gas, etc., some loss of inventories or stocks or depletion is an inevitable part of the business. Such losses are allowable deductions, But keep in mind that an <a href=\"https:\/\/www.irstaxapp.com\/irs-audit\/\" target=\"_blank\" rel=\"noreferrer noopener\">IRS audit <\/a>may trigger for scrutinizing these deductions more than others, so deductions need to be reasonable and properly authenticated or vetted by an accountant for <span style=\"color: #3366ff;\"><em>[Where to find on Schedule C: Line 12 ]<\/em><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">6. Depreciation on business assets<\/h3>\n\n\n\n<p>You should claim depreciation expense on business assets like computers, office equipment, tools, furniture, and cars. The depreciation claim is divided over the years and computed as per the rates of depreciation specified by the IRS. However, small business owners can opt for full depreciation by claiming a <em>section 179 deduction in the year of asset purchase<\/em>. See <a href=\"https:\/\/www.irstaxapp.com\/section-179-tax-deduction-calculator\/\">section 179 deduction calculator<\/a><strong>.&nbsp;<span style=\"color: #3366ff;\"><em>[Where to find on Schedule C: Line 13 ]<\/em><\/span><\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">7. Employee Wages<\/h3>\n\n\n\n<p>Expenses on salaries, commissions, and bonuses to employees can be claimed as wage expenditures for self-employment deductions.\u00a0\u00a0<span style=\"color: #3366ff;\"><em>[Where to find on Schedule C: Line 26 ]<\/em><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">8. Employee Benefit Programs<\/h3>\n\n\n\n<p>Apart from the usual salary or wages to employees, you may provide your employee&#8217;s health or life insurance, education assistance, etc. These can be claimed as deductible expenses under employee benefit programs.&nbsp;<span style=\"color: #3366ff;\"><em>[Where to find on Schedule C: Line 14 ].&nbsp;<\/em><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">9. Home Office Deduction<\/h3>\n\n\n\n<p>As a small business owner, your business often runs from your home. So, home office expenses should be determined by apportioning expenditures on rent, utilities, repairs, insurance, and mortgage interest related to your home. Claiming home office expenses is easy, but there is a great chance of an IRS audit on this claim. So it is prudent that you create a dedicated area within your home for exclusive use for business purposes, and only proportionate expenses about that area should be filled in\u00a0<strong><a href=\"https:\/\/www.irs.gov\/pub\/irs-pdf\/f8829.pdf\" target=\"_blank\" rel=\"noopener\"> IRS Form 8829<\/a>.\u00a0<\/strong><span style=\"color: #3366ff;\"><em>[Where to find on Schedule C: Line 30 ].\u00a0<\/em><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">10. Self-employment Deductions for Insurance<\/h3>\n\n\n\n<p>A self-employed person can deduct <a href=\"https:\/\/www.irstaxapp.com\/10-hsa-tax-benefits\/\">personal health insurance premiums<\/a> if the following criteria are met :<\/p>\n\n\n\n<ul>\n<li>Business is not at a loss for the tax year. Only if there is a profit,you can claim personal health insurance expenses against that profit<\/li>\n\n\n\n<li>You were not eligible to enrol in an employer\u2019s health plan or a plan for your spouse.<\/li>\n\n\n\n<li>You can only claim premiums paid for the months when you were not eligible for an employer\u2019s health plan.<\/li>\n<\/ul>\n\n\n\n<p>Thus, the answer to the question, &#8220;If self-employed deduct medical expenses?&#8221; is in the affirmative, subject to the abovementioned conditions.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Self-employment health insurance deduction limitation<\/h4>\n\n\n\n<p>There are certain self-employment health insurance deduction limitations, as detailed below. <\/p>\n\n\n\n<ol>\n<li>A self-employed taxpayer can claim a deduction of premiums for medical, dental, and qualifying long-term care insurance coverage.<\/li>\n\n\n\n<li>As stated in 1, the expense can be claimed for self, spouse, and dependents.<\/li>\n\n\n\n<li>You could not claim health insurance expenses if you or your spouse were eligible for an employer-subsidized health plan for any month.<\/li>\n\n\n\n<li>The health insurance premium deduction can&#8217;t exceed the earned income you collect from your business.<\/li>\n\n\n\n<li>Self-employed persons can also claim expenses incurred to pay employees&#8217; health insurance premiums.<\/li>\n<\/ol>\n\n\n\n<p><span style=\"color: #3366ff;\"><em>[Where to find: This is not on Schedule C but on Line 29 of Form 1040 ].&nbsp;<\/em><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">11. Interest (mortgage)<\/h3>\n\n\n\n<p>Any <a href=\"https:\/\/www.irstaxapp.com\/mortgage-interest-deduction-8-faqs\/\">interest paid on a mortgage<\/a> for a property that is used for business purposes is allowed expenditure. Make your claim based on <strong>Form 1098 that you received from the lender if you paid<\/strong> mortgage interest during the year.\u00a0<span style=\"color: #3366ff;\"><em>[Where to find on Schedule C: Line 16a].\u00a0<\/em><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">12. Interest (other than home mortgage)<\/h3>\n\n\n\n<p>If you borrowed money for business from any source like credit cards or business lines of credit, you could deduct the interest paid on the loan portion used for business purposes.<span style=\"color: #3366ff;\"><em>\u00a0[Where to find on Schedule C: Line 16b].<\/em><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">13. Labor on Contract<\/h3>\n\n\n\n<p>When you hire independent contractors for business-related jobs, say a web developer or temporary repair jobs for computers, such expenditures are fully allowable against business profit).&nbsp;<span style=\"color: #3366ff;\"><em>[Where to find on Schedule C: Line 11].<\/em><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">14. Legal or Professional Services<\/h3>\n\n\n\n<p>Professional fees paid to attorneys, tax preparers, accountants, and other professionals for any services used for your business are allowable expenditures.<span style=\"color: #3366ff;\"><em>[Where to find on Schedule C: Line 17].<\/em><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">15. Client Entertainment<\/h3>\n\n\n\n<p>Entertaining clients may be a requirement for your business as part of marketing or sales efforts. The expenditure on meals and entertainment of clients or on travelling out-of-town on a business trip can all be deducted.\u00a0<span style=\"color: #3366ff;\"><em>[Where to find on Schedule C: Line 24b].<\/em><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">16. Office Expenses<\/h3>\n\n\n\n<p>Various office maintenance-related expenditures like cleaning or general maintenance are also allowed business deductions.&nbsp;<span style=\"color: #3366ff;\"><em>[Where to find on Schedule C: Line 18].<\/em><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">17. Employees&#8217; Pension Plans<\/h3>\n\n\n\n<p>Your share on your employees\u2019 retirement plans like 401(k) is allowed business expense. Yes, contributions for any pension plan for yourself are deductible separately as deductions in Form 1040 Line 28 but not as business expenditures.&nbsp;<span style=\"color: #3366ff;\"><em>[Where to find on Schedule C: Line 19].<\/em><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">18. Rental expenses on vehicles, equipment<\/h3>\n\n\n\n<p>Your business may be required to rent or lease machines, equipment, and vehicles. When you pay for such rent or lease, it can be deducted from your business profit.\u00a0\u00a0<span style=\"color: #3366ff;\"><em>[Where to find on Schedule C: Line 20a].<\/em><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">19. Rent or Lease (other business property)<\/h3>\n\n\n\n<p>Rent or lease payments, including any government taxes on office, land, or any other item other than vehicles, can be deducted as deductible business expenses against the business&#8217;s gross profit.&nbsp;<span style=\"color: #3366ff;\"><em>[Where to find on Schedule C: Line 20b].<\/em><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">20. Repairs and Maintenance<\/h3>\n\n\n\n<p>Repairs or maintenance of offices, fixing computers, or replacing worn equipment parts are necessary for the business. Expenditure on such repairs can be deducted.&nbsp;<span style=\"color: #3366ff;\"><em>[Where to find on Schedule C: Line 21].<\/em><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">21. Office Supplies<\/h3>\n\n\n\n<p>Any office supplies like cleaning supplies if you clean office or business space, pens or printer ink, hot\/cold bags used for office, and office decorations are allowed for business expenditure.[<span style=\"color: #3366ff;\"><em>Where to find on Schedule C: Line 22].<\/em><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">22. Any Other Expenses<\/h3>\n\n\n\n<p>If you can prove with the justification of an expense incurred for your freelancing business, it is deductible from gross income from your business\/side hustle income.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">23. Self-Employed Contributions Act (SECA) Tax Deduction<\/h3>\n\n\n\n<p>The law allows any other expenses incurred exclusively for the business to be deducted while computing the business&#8217;s profit. Thus, if business demands short-term courses for your staff or some skill development courses, banking fees, association dues, business gifts, and industry magazines, all such expenses are <strong>deductible.<\/strong> .[<span style=\"color: #3366ff;\"><em>Where to find on Schedule C: Line 27a].<\/em><\/span><\/p>\n\n\n\n<p>A self-employed pays his or her own share of\u00a0 Social Security and Medicare contributions, collectively known as SECA.\u00a0You can deduct the self-employment deduction on Line 27 of Form 1040. You will compute this amount as part of Schedule SE.[Where to find on Form 1040<span style=\"color: #3366ff;\"><em>: Line 27].<\/em><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">24. Taxes\/Licenses<\/h3>\n\n\n\n<p>You can claim various business taxes like your share of the Federal Insurance Contributions Act (<a href=\"https:\/\/www.irstaxapp.com\/2021-fica-tax-calculator\/\">FICA tax<\/a>) for your employees, state or local license fees, or licenses required for your business type. <span style=\"color: #3366ff;\"><em>Where to find on Schedule C: Line 23].<\/em><\/span><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">25. Travel &amp; Tour Expenses<\/h3>\n\n\n\n<p>Expenditures on business trips that consist of expenses on lodging, airfare or rental cars, and local transportation are allowable business deductions. IRS rule says that the travel must be overnight, away from your residence, and primarily for business.&nbsp;&nbsp;<span style=\"color: #3366ff;\"><em>[Where to find on Schedule C: Line 24a].<\/em><\/span><a href=\"https:\/\/www.irs.gov\/pub\/irs-pdf\/i1040sc.pdf\" target=\"_blank\" rel=\"noopener\">IRS tax help on Schedule C<\/a><\/p>\n\n\n\n<p>The list above of expenses that count for <em><strong>self-employment deductions <\/strong><\/em>is not exhaustive. But any expense is allowable if you prove that such expense was incurred for your business purpose.<a href=\"https:\/\/www.irs.gov\/pub\/irs-pdf\/i1040sc.pdf\" target=\"_blank\" rel=\"noopener\"> <\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Here is list of self employment deductions- 25 deductible expense  , that must be taken into account while  computing profit of business<\/p>\n","protected":false},"author":1,"featured_media":5655,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[9],"tags":[140,141],"amp_enabled":false,"_links":{"self":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/posts\/1081"}],"collection":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/comments?post=1081"}],"version-history":[{"count":5,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/posts\/1081\/revisions"}],"predecessor-version":[{"id":7588,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/posts\/1081\/revisions\/7588"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/media\/5655"}],"wp:attachment":[{"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/media?parent=1081"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/categories?post=1081"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.irstaxapp.com\/wp-json\/wp\/v2\/tags?post=1081"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}