The Top Self-Employment Tax Deductions in 2022

Sales Tax Exemption

Freelancers, independent contractors, and small business owners pay a lot more taxes than their employed counterparts. While legislators have tried to soften the blow of self-employment tax, they still have to shoulder 15.3%, which is often twice what employees pay every year.

Independent contractors have to take advantage of tax deductions to keep more money in their pockets. Here are 6 of the best deductions available to people who file self-employment taxes.

1. Home Office Deductions

A home office deduction allows you to take a percentage off your home/utilities taxes. This percentage is determined based on the square footage of your home compared to your office space. For example, if your office is 17% of your home, 17% of your utilities are tax-deductible.

If you plan on renting a new apartment or house to cash in on a bigger office, you’ll need to generate a paystub online to show your proof of income and be approved.

2. Internet and Phone Bill Deductions

You can deduct the business portion of your phone, internet, and fax expenses. If you have a phone strictly for business, then you can deduct its full use. If you don’t, you’ll have to determine how much of your internet and phone usage is directly related to your business.

Unless you can prove your phone or internet is only used for business, a 100% write off will throw up red flags. It’s better to keep the deduction around 70-90% for most people. Use your phone or internet bill to track any business-related calls or long-distance charges.

3. Meals and Travel Deductions

Business meals are tax-deductible up to 100% based on the Consolidated Appropriations Act. While this act will expire at the end of 2022, you can still deduct meals up to 50% once it ends. For this deduction to count, meals can’t be considered extravagant under the circumstances.

All business-based travel expenses are 100% tax-deductible if traveling lasts longer than a workday, requires you to sleep, or takes place away from your tax home or business.

4. Business Vehicle Use Deductions

Your business vehicle, which can also serve as your personal vehicle, can be deducted if you use it specifically for business. You can calculate this deduction using the standard mile rate, which is 58.5 cents per mile, and multiplying it by your total annual business miles.

You can also use the actual expense method, which calculates the percentage of driving you did in a year with the total costs of depreciation, car insurance, repairs, gas, oil and registration.

5. Loan Interest Deductions

Interest on a business loan is 100% tax-deductible. However, if your loan is used for personal and business purposes, you’re only allowed to deduct the business portion. To take advantage of this deduction, you need to track the disbursement of funds across the entire loan.

While this deduction is perfect for business owners who have incurred interest, it’s cheaper to avoid paying interest altogether. But for some businesses, borrowing may be the only option to increase production during the busy period or to get through slow or seasonal periods.

6. Subscriptions and Publications Deductions

Freelancers can deduct the costs of specialized journals, books, and magazines as long as they’re directly related to their business. For example, a tech start-up could write off a subscription to WIRED, but they can’t deduct the newspaper or a book on writing.

At the same time, a programmer could write off exuberant purchases. A $400 dollar book on coding is just as tax-deductible as a $100 or $5 one as long as it’s relevant and needed.

Hi, I'm Raj Hirvate and I am a Tech Blogger from India. I like to post about technology and product reviews to the readers of my blog. Apart from blogging i'm a big Anime fan I Love Watching Naruto, One piece and Death Note.

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