Tax Deductions for Independent Contractors / Self Employed [2024]

If you're an independent contractor, you can reduce your tax bill by claiming write-offs on your self-employment income. Here is a list of all the tax deductions available for independent contractors (self-employed personnel) in the US, along with where to include the relevant expenses on a specific schedule. 

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Home office expenses

If you’re an independent contractor or self-employed, you probably work from a home office. Because this space is used for business purpose, you can write off a specific / certain portion of your mortgage interest, rent, property taxes, security system, and homeowner’s insurance for the dedicated business area. 

How do you calculate home office deduction?

There are two ways to calculate home office deductions. Run your costs through both methods and choose the one that gives you the higher deduction.

1. Standard method: Calculate the home office deduction by determining the percentage of your home’s square footage that is used for business. Use IRS Form 8829 (Expenses for Business Use of Your Home) & attach it to your Schedule C.
2. Simplified method: For home office spaces below 300 sq feet, you can use the IRS’s simplified method. Instead of itemizing, claim a standard deduction of USD 5 per square foot, up to a maximum of $1,500 per year.

You can record home office expenses on Line 30 of your Schedule C.

For more details, check out IRS Publication 587 (2021), Business Use of Your Home.

Here's a fun fact: Independent contractors can deduct the cost of their morning coffee if it's for a business meeting. So, those coffee shop meetings can perk up your tax savings, too.

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Office expenses

• Office supplies: Deduct the full cost of office supplies like pens, paper, sticky notes, and other stationery used during the year. If supplies are used to make / ship a product, add those costs to the COGS. Record these expenses on Line 18 of your Schedule C.
• Repairs and maintenance: Deduct incidental repairs and maintenance of office space and equipment. Record these on Line 21 of your Schedule C.
• Utilities: Power, water, and internet bills are deductible, but home office utility expenses should be claimed on the home office expense line instead. Record these expenses on Line 25 of your Schedule C.

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Advertising costs

You can fully deduct online and offline advertising costs, including Facebook or Google Ads, trade show promotions, and business cards. Deduct fees for PR agencies or freelancers, but not political advertising. Record these expenses on Line 8 of your Schedule C.

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Commissions and fees

Commissions paid to non-employed people for sales and marketing are tax-deductible, including sales reps or seller fees on platforms like Amazon or Etsy. If you receive more than $600, your client must file Form 1099-NEC. Record these on Line 10 of your Schedule C.

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Contract labor

If you hire contractors, such as designers / web developers, you can deduct their fees. If you pay over $600, complete Form 1099-NEC. Record these expenses on Line 11 of your Schedule C.

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Professional services

Fees for tax advisors, lawyers, or accountants are deductible. If you pay for tax preparation, you can deduct the cost of preparing Schedule C. Record these on Line 17 of your Schedule C.

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Cell phone bill

Deduct the cost of a business-dedicated cell phone or a portion of a personal cell phone used for business. Record these expenses under Part V (Other Expenses) of your Schedule C.

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Equipment depreciation

You can write off the depreciation of equipment used for work, like laptops or printers. For more help, consult an accountant. You can record depreciation on Line 13 of your Schedule C. For more details, see Publication 946 (2021), How To Depreciate Property.

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Travel expenses

Deduct business-related travel costs like accommodation, meals, and transportation. Record these on Line 24 of your Schedule C. For more details, see Publication 463 (2021), Travel, Gift, and Car Expenses.

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Meals

You can deduct 50% of business-related meal costs, such as business trips, client meals, and conference meals.

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Car expenses

If you bought a car for business use, you can deduct its full cost using Section 179. For cars used both personally and for business, use the actual expenses method to deduct a portion of car expenses. The IRS permits a standard mileage rate of $0.585 per mile for 2022. Record these on Line 9 of your Schedule C. For more information, see Publication 463 (2021), Travel, Gift, and Car Expenses.

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Business insurance

Premiums for business insurance, such as liability, theft, fire, and workers’ compensation, are deductible. Record these on Line 15 of your Schedule C.

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Health insurance

Your medical insurance premiums (health & dental) for yourself, your spouse, and your family can be deductible unless you’re eligible for another employer’s plan. Use Worksheet 6-A to calculate your deduction. Record these expenses on Line 17 of your Schedule 1.

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Retirement plan costs for employees

If you have employees and offer plans like a 401(k) or SIMPLE-IRA, you can deduct these costs. Record pension contributions on Line 19 of your Schedule C.

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Business licenses and taxes

You should deduct any business licenses, certifications, and regulatory taxes related to your operations. You can also claim half of the self-employment tax you pay. Record these expenses on Line 23 of your Schedule C.

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Business setup and startup costs

If you set up a new business, you can deduct up to $5,000 in setup costs, like market research and advertising. Larger amounts can be amortised over several years. Record these expenses under Part V (Other Expenses) of your Schedule C.

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Interest expenses

Mortgage interest, credit card interest, and equipment loan interest are deductible, but you can’t deduct prepaid interest. Record these on Line 16 of your Schedule C. 

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Education expenses

You can deduct educational expenses such as webinars, business books, and professional publications. Record these under Part V (Other Expenses) of your Schedule C. You might also be eligible for an Education Credit if you’re a student. 

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