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The IRS is pretty generous when it comes to deductions; there's a huge list of expenses that self-employed and freelancers can use to lower their taxable income. The only prerequisite if you're freelancing is that the expense must be relevant to your business or trade.
If you are a self-employed makeup artist, you can deduct items such as mascara, eyeliner or a set of nail files. Or, if you are a self-employed delivery driver, you can deduct items like the service cost of your delivery vehicle, a car loan installment and delivery vehicle depreciation cost.
But there is a bright side. You can deduct a portion of the interest you pay on your mortgage if you operate your business as a self-employed freelancer or sole proprietor.
If you run a massage therapy practice out of your home, for example, and you're using 20% of the total square footage of the mortgaged property, you can deduct 20% of your monthly mortgage interest payment.
If your mortgage interest rate is 6% of the total amount borrowed, and your interest payment is $3,600 in a given year, you could deduct 20% of it or $720 for the year.
Adding this amount to your other tax-deductible business-related expenses can lower your taxable income considerably. You can either keep track of all your expenses on your own and search for deductions, or you can use FlyFin A.I., which automatically finds your business expenses and identifies every possible deduction, helping you lower your tax payment by more than the previous year.
The IRS stipulates that for your mortgage interest to be considered deductible:
If you work out of a home office, you can also deduct some of your home expenses as business expenses, as long as they qualify as a business deduction. A portion of your utilities like electricity, natural gas, water, and trash service are all deductible. The same goes for home maintenance and phone and internet bills. The amount you write off just needs to be proportional to the amount of work-from-home office space you use in your home. The same is true for your home phone and internet service.
The IRS also lets you deduct the full cost of items you buy for your home office. If you run a tattoo studio out of your home, you can deduct your workbench, the tools you use for tattooing, lights, etc., as business expenses.
You can even deduct plants to beautify the waiting room of your home massage studio or a portion of your Netflix subscription for clients to watch. These deductions can lower your taxable income enough that, in some cases, you end up paying almost no taxes at all.
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.