For independent contractors, one of the most effective ways to save money, believe it or not, is on taxes. We all have to pay taxes if we have an income, but if you work for yourself, you can take advantage of tax deductions, and hundreds are available to independent contractors.
For many, mileage is one of the most important money-saving tax deductions. If you're a seasoned independent contractor, you probably have a good idea of the rules and regulations around when to deduct mileage to and from work self employed.
But, if you've just started working for yourself, you might be wondering, "as an independent contractor can I deduct mileage?" Because independent contractor mileage can make a big difference in your bottom line, it can be a big help to know exactly when and how you can deduct it.
Anyone who does not work for a company as an employee is considered an independent contractor because they work independently of any company. In fact, independent contractors are their own businesses.
There are essentially two kinds of workers in the US, those who work as an employee of a company, receiving W-2 forms for tax purposes, and those who do work for any number of companies as independent contractors receiving 1099 forms.
"Independent contractor" is synonymous with many words you've probably heard used to describe people who are their own boss: freelancer, gig worker, self-employed individual, sole proprietor, partner in a business partnership.
When you have your own business as an independent contractor, you inevitably have business expenses. To help offset the cost of doing business, the Internal Revenue Service (IRS) allows independent contractors to deduct business expenses from the amount of their income that can be taxed.
The lower your taxable income, the less you pay in taxes. If you're an independent contractor working in the nursing profession, for example, you're allowed to deduct the cost of your medical equipment, like stethoscopes and latex gloves, and the cost of your uniforms. You can even deduct some of your rent and utilities at your home, if you do your administrative work for your business out of your home office.
There are actually two ways you can deduct business costs related to your car. You can figure out exactly what you paid for expenses like gas, maintenance and repairs, etc. (called actual expenses), or you can calculate the percentage of driving you do for business out of all the driving you do with your vehicle. Then you can deduct that same percentage of your driving-related expenses.
It's less complicated to take the per-mile deduction because there is less math to do, but claiming actual expenses could give you a lower taxable income in the end. If you go that route, the IRS offers publication 463 to tell you exactly what you can deduct.
You can deduct independent contractor mileage when you drive from your place of business to a job site. If you're an electrician, and you have your own shop that is not at your home, mileage for driving from there to a job site is deductible.
The same goes for traveling between two different jobs or traveling to meetings with your clients. Naturally, traveling back to your place of business from any of these trips qualifies, too.
What's not deductible is mileage for driving from your home to your place of business. Driving from your home to a job site isn't deductible either, unless you work out of a home office.
Pro tip: during trips where your mileage is deductible, you can also deduct anything you pay for parking or tolls. If you need to pay to leave your car in a parking garage while you meet a client at their place of business, you can deduct those fees.
FlyFin developed a tool to calculate the car mileage tax deduction for independent contractors. The Car Mileage Tax Calculator takes all of an independent contractor's vehicle expenses into account and applies the current self-employment tax rate for vehicle mileage deductions.
Independent contractors can save themselves the time of having to calculate their car mileage tax deduction and get an accurate picture of what they can save.
FlyFin was built for freelancers, independent contractors and self employed individuals.
But W-2 employees can file taxes, too! A.I. finds every possible tax deduction. Then, CPAs file a 100%-accurate tax return, saving independent contractors several thousand dollars and 90% of the time it used to take for their taxes.
FlyFin CPA Team
With a combined 150 years of experience, FlyFin's CPA tax team includes tax CPAs, IRS Enrolled Agents and other tax professionals, offering users the most comprehensive tax advice and preparation.