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An Intro To Self-employed Consultant Tax Deductions

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An Intro To Self-employed Consultant Tax Deductions

Want to start consulting but aren't sure if it’s the right path for you? Why not start freelancing? Working as a self-employed consultant can help you test the waters to see if this is something that you could see yourself doing full-time. There are hundreds of consultant tax deductions that can lower your taxable income and make tax season a little less daunting. You can use a consultant tax deduction calculator to find relevant tax write-offs that you can claim. All ordinary and necessary expenses incurred for your business can be tax-deductible, according to the IRS. When filing your taxes, the IRS will need to see a record of these expenses, so it is important to track them throughout the year and have everything you need to file by the tax deadline.
Key takeaways:
  • Business expenses that are ordinary and necessary can be used as tax deductions for consultants
  • The IRS requires a record of these expenses in order to deduct them

Table of contents

Filing taxes as consultants: how does it work?...Read more

Are self-employed consultants “pass-through” businesses?...Read more

Tax deductions for consultants: what can I write off?...Read more

Filing taxes as consultants: how does it work?

If you are a consultant working as a freelancer or independent contractor, you are essentially operating as a sole proprietor and are considered to be “self-employed.” This means you pay self-employment tax on any income you earn over $400. You’ll receive a 1099-NEC from every entity you work for by the end of January showing your earned income. You will use this information to fill out Schedule C where you will report your net profit or loss for the year and file it alongside the standard Form 1040. You can use a self-employment income tax calculator to get a full breakdown of how much tax you’ll have to pay. If you owe over $1,000 in tax, you’ll have to make this payment every quarter. A quarterly tax calculator can be incredibly useful to estimate your tax obligations throughout the year. This way you can ensure that you have enough money set aside to cover your tax payments and avoid any unpleasant surprises during tax season.
Image with text listing important tax forms for self-employed consultants including 1099-NEC, Schedule C, Schedule SE, Form 1040, and Form 1040-ES for reporting income, calculating taxes, and claiming write-offs.

Are self-employed consultants “pass-through” businesses?

Most self-employed consultants operate as sole proprietorships, which means they are considered to be a “pass-through business.” This just means that any profit earned through their business is taxed on their individual tax returns at their personal tax rates. When you're freelance consulting, filing your taxes can be a lot to wrap your head around, especially if you’re just starting out. You have to keep track of all your expenses accurately and meticulously if you want to claim them as tax deductions. FlyFin simplifies the process by linking your expenses to let A.I. find every possible deduction that you can write off, saving you time and money. CPAs specializing in 1099 taxes are available 24/7 in the app to answer any question you may have about 1099 taxes, as well as prepare and file your tax returns for you.
Image of FLYFIN text explaining pass-through entities like S corp, partnership, LLC or sole proprietorship. No corporate income tax, business income treated as personal income, income passed through to owners for individual taxation. Relevant for self-employed, 1099, freelancer, and taxes.
The Tax Cuts and Jobs Act of 2017 created a new deduction that allows pass-through business owners, including those who are consultants, to deduct 20% of their net income from their business, known as a Qualified Business Income Deduction (QBID). For example, if you earn $60,000 in income in 2022, you can deduct $12,000 from it and lower your taxable income to $48,000. But this deduction comes with a lot of rules. For one, your business has to operate in the US. Your income cannot exceed a certain threshold that is based on your filing status. For 2022, it is under $170,050 for single filers and under $340,100 for married filing jointly. You also cannot deduct any kind of investing interest income (even from property). But if your business rents out property as a real estate service, that income qualifies for the deduction. You will use Form 8995 to calculate your deduction and report it on Schedule C. You can claim this deduction regardless of whether you take the standard or itemized deduction, as this deduction only affects your self-employment income.

Tax deductions for consultants: what can I write off?

There are many tax deductions that self-employed consultants can use to lower their taxable income. Using a 1099 tax calculator can help you find specific write-offs relevant to your industry.
Image showing tax deductions for self-employed consultants including legal fees, utility bills, software subscriptions, business insurance, car mileage, social media advertising, office supplies, business travel expenses, and business gifts.
As a self-employed consultant, it is important to understand the tax deductions available to you to maximize your earnings and ensure compliance with relevant tax laws and regulations. While being your own boss can be great in terms of flexibility, managing your taxes on your own can be stressful. However, with careful planning and attention to detail, you can take advantage of a range of tax deductions to reduce your tax liability and keep more of your hard-earned money. One of the most important steps to optimizing your tax deductions as a self-employed consultant is to keep accurate records of all business-related expenses. If it all gets too complicated, you can find the tax app that's right for you or consult a tax professional for advice.

Depreciation Tax Deduction

The depreciation tax deduction can be claimed for any asset that is used for business. There are three methods to calculate this deduction.

Education Expenses Tax Deductible

Education expenses are tax-deductible for self-employed individuals as long as they are related to their current job. Report the deductions on Schedule C.

Internet Bill Tax Deduction

For many who work from home, the internet is necessary for doing business. For some people, their internet bill counts as a tax write-off.

Write Off Your Car Payments

There are many tax deductions you can take related to your car, if you use it for work, but unfortunately your car loan payment isn't one of them.

Home Office Deduction

How the home office deduction saves self-employed individuals and freelancers on their taxes.

Home Improvement Deduction

What qualifies as a home improvement tax deduction and how homeowners who are self-employed or freelancers can benefit most.

Travel Expense Deduction

If you travel for work as a freelancer, there are a number of travel expenses you can claim as tax deductions in 2023 – find the details here.

Food and Entertainment Deduction

For 2023, you can deduct 50% of the cost of business meals as tax deductible – but not every meal can be deducted. This is relevant to self-employed people.

Car depreciation tax

Here's how to take advantage of depreciation, one of the biggest tax deductions people who use their car for work can take.

Car tax write off

Many freelancers drive their own vehicle for business and may qualify for certain car and mileage tax deductions.

Moving expenses deduction

Until recently, you could deduct moving expenses on your tax return. Recent changes to the tax rules have impacted whether you can deduct moving expenses.

Simplified home office deduction

If you use space in your home as an office for your business, you can take either the actual home office deduction or the simplified home office deduction.

Rent Tax Deduction

If you're self-employed, there are few ways you can write off your rent, and if you know how to use them, they can be among the most important ways to save money on taxes each year.

Side Hustle Taxes

Self-employed individuals can write off business expenses when filing side hustle taxes. You can avoid paying taxes on side jobs if your net income is under $400 in a year.

Mileage Tax Deduction

Get a car mileage tax deduction using either the standard mileage deduction or actual expenses deduction. You will report this on Schedule C.

Cell Phone Tax Deduction

A cell phone tax deduction is available to self-employed individuals if it is used for their business. They can also write off their internet usage.

Is Credit Card Interest Tax Deductible?

Credit card interest is tax-deductible if it is from a business-related purchase. You can write off a portion of the interest even on a personal credit card if it comes from a business expense.

Are Office Expenses Deductible?

The home office tax deduction is used to write off your home office and office-related expenses. Claim it using the standard or simplified method.

Advertising And Marketing Expenses Deduction

Marketing tax deductions related to promoting a business can be claimed by self-employed individuals. Report them on Schedule C.

Business Startup Costs and Deductions

Business startup costs can be amortized over 15 years. You can also deduct up to $5,000 in the first year if total costs are below $50,000.

Vehicle Write Off For Business

Vehicles used for business can be a tax write-off in 2023. You can claim this deduction even if you lease your vehicle under the actual expenses method.

Are Subscriptions Tax Deductible?

Subscriptions are tax deductible for self-employed individuals. You can write off the business use percentage as a tax deduction on Schedule C.

Depreciation Tax Deduction

The depreciation tax deduction can be claimed for any asset that is used for business. There are three methods to calculate this deduction.

Education Expenses Tax Deductible

Education expenses are tax-deductible for self-employed individuals as long as they are related to their current job. Report the deductions on Schedule C.

Internet Bill Tax Deduction

For many who work from home, the internet is necessary for doing business. For some people, their internet bill counts as a tax write-off.

Write Off Your Car Payments

There are many tax deductions you can take related to your car, if you use it for work, but unfortunately your car loan payment isn't one of them.

What’s FlyFin?

FlyFin caters to the tax needs of freelancers, gig workers, independent contractors and sole proprietors. It offers a host of cutting-edge tax tools that help you quickly find deductions. You can also use tools like a home office deduction calculator. FlyFin uses an A.I. to track all your business expenses automatically and find every possible tax deduction. Once you have all your possible deductions in one place, our CPA team files a guaranteed 100% accurate tax return for you. It saves you a couple of thousand dollars and a ton of time on your taxes. Download the app and have your taxes filed in minutes, saving time and more money on your taxes than last year, guaranteed.
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