When you’re self-employed, you can deduct the expenses you incur for your job as long as they are considered necessary and ordinary to earn income. Here are eight real-life situations in which self-employed tax filers can claim a tax deduction.
Deducting advertising and marketing expenses
Example:
A dog walker has their mornings booked walking dogs in the neighborhood, but they want to get the word out. They have chosen business cards for their dog-walking business, and they also want to hire someone to build their website.
What is deductible:
The business cards, the website subscription fees, and the cost of hiring a designer can be deducted on their tax return. This is because the IRS understands that to promote a business, and to attract clients, you must advertise your services. Whether you opt for traditional or digital marketing, these expenses are usually deductible.
Deducting computer software expenses
Example:
A content designer does some freelance work in the evenings and on weekends. They get a new computer for home and purchase their own access to data visualization platforms. They also need to edit images and add copy for their clients, so they invest in photo editing software.
What is deductible:
Many self-employed people rely on specific software to do their job. In fact, if you work in a creative field like web design, photography, or blog writing, your entire business may revolve around the programs you use. The IRS allows you to deduct the cost of off-the-shelf software products the year you put them into use. “Off-the-shelf” means the software is not custom-designed and is available to the general public for purchase.
Deducting tools and equipment expenses
Example:
A landscape designer needs a mower, edger, and a blower to get their business started. They also need a trailer to transport all the equipment. The truck they use to haul the trailer is also used as a personal vehicle when they are not on the job.
What is deductible:
When you work for yourself, the IRS will allow you to write off your business equipment. In the case where tools are especially expensive – like a mower, edger, blower, and trailer could be – they can either be written off in the year they are used or they could be depreciated.
The truck is not a tax deduction, but the landscape designer could write off the miles they travel for business. This accounts for the wear and tear that happens to the vehicle while they are on the job.
Deducting business meals
Example:
A photographer meets with a prospective client at a coffee shop to show their photography portfolio. They both order food and a drink.
What is deductible:
The photographer can write off half of what they spent at their business meeting. They’ll need to hang on to the receipt as proof of the expense. Get tips for keeping your receipts for tax time.
Under the current tax code, you can deduct 50% of the cost of your business-related meals. But, you’re no longer allowed to deduct entertainment expenses, so if your job-related conversation happens at a baseball game, you shouldn’t deduct the price of the tickets.
Deducting license fees and expenses
Example:
A hair stylist must be licensed to cut, color, and style hair. Continuing education is required to renew licenses, and training must be completed to keep up with current trends and styles.
What is deductible:
License or regulatory fees paid to your local or state government are usually deductible.
Deducting subscriptions
Example:
A medical writer, who is a member of the American Medical Writers Association, has subscribed to AMWA Journal to stay informed of the latest news and opportunities in medical communications.
What is deductible:
A subscription to a trade or professional journal associated with your business is usually deductible.
Deducting business mileage
Example:
An artist uses a van they bought just for business to transport artwork to and from galleries. At art festivals, they sell their paintings out of the van.
What is deductible:
If you use your vehicle to get from job site to job site, or for transporting your supplies to a point of sale, the IRS will allow you to deduct vehicle expenses based on the number of miles you travel. In the above example, the artist uses their van only for business, and not for any personal travel, so they do not have to divide their mileage between personal and business use.
If you drive the same vehicle for work and for personal travel, you’ll need to track and report only those miles that count for the deduction.
See how to calculate your mileage deduction.
The information in this article is up to date through tax year 2021 (taxes filed in 2022).