5 Independent Contractor Deductions You Won’t Want to Skip

September 11, 2020

As an independent contractor, taxes do not get taken out of your pay during the year, which can result in paying a sizable lump sum in April. Estimated taxes solve this problem, as does knowing what deductions you are eligible for. Review deductions your Encino tax consultants want you to know about so you don’t pay more than you should. 

Educational Expenses

If you took continuing education classes or completed other coursework, you have expenses to deduct. While you cannot deduct classes that have to do with a new career, you can expense tuition, books, and supplies as long as the courses are in line with your services as a sole proprietor. If you spent money on gas to get to said classes, deduct that as well. Any travel-related costs are deductions, but again, but must be directly related to your business. 

Retirement Contributions

Since you do not enjoy 401(k) benefits as a freelancer, you are in charge of setting up retirement funds such as an IRA. Maintain a list of your contributions to your retirement fund so you can list them as deductions. 

Food

Meals with clients, office snacks, and other food related to your business operations are deductible. While this doesn’t mean you can write off your personal groceries or dinners out, the IRS does allow business meal-related write-offs, including those you purchase when you travel. 

Health Insurance

As with retirement funds, independent contractors have to purchase their own health insurance. It is usually possible to write off health insurance premiums assuming the amount is not greater than your income for the year. Your Los Angeles accounting experts can help you understand premium deductions if you require assistance. 

Home Office & Supplies

If you work from home, it is possible to deduct a portion of your rent and utilities on home office grounds. You can also deduct any supplies you purchase throughout the year, including assorted hardware and software, notebooks and pens, stamps, and printer ink and cartridges. The supplies should be “ordinary and necessary” as per IRS guidelines. 

Work with your accountant service in Los Angeles to get the most from your deductions: contact Wallace & Associates today.