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Standard deduction and business expense

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Can I Use the Standard Deduction With Business Expenses?

When you're self-employed, or own a small business, you're running the show, which is great. You can make all the decisions you think are best for your business. But you're also on the hook for all the expenses. No one else can pay the rent or purchase the tools or inventory you need to run your business.

Table of contents

Key takeaways:...Read more

What is the standard deduction vs. itemized deduction?...Read more

How do I know which deduction method to use?...Read more

What are small business tax deductions?...Read more

What does itemizing mean?...Read more

Key takeaways:

  • Whether you take the standard deduction or not, you can still itemize your business expense deductions
  • The standard deduction only has to do with your W-2 income
  • Itemized deductions can be either personal or for your business
What makes that fact easier to swallow is the tax savings you can get at the end of the year based on all those business expenses. This is especially important because of the tax bills you're responsible for when you work for yourself. You've got income tax and self-employment taxes (which cover Social Security and Medicare taxes) to worry about because there is no employer to withhold them from your paycheck automatically. That's all on you to keep track of and pay, but if you write off all of your deductible business expenses from your taxable income, the taxes you owe can be drastically reduced. The standard deduction is one of the two ways to reduce your taxable income, but it doesn't take into account every single business expense. That's why self-employed people often want to know what the pros and cons are of the standard deduction vs. itemized deduction. Another common question is whether a self-employed person can take the standard deduction and still deduct some business expenses.

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What is the standard deduction vs. itemized deduction?

The important distinction here is between business and personal expenses. With the standard deduction, you can take the roughly $12,000 the IRS allows taxpayers to deduct from their taxable income, or you can itemize your personal expenses and deduct those. This choice has nothing to do with your business expenses, which you can deduct from your taxable income on top of the standard deduction, but we'll get to that in a bit. When it comes to your personal expenses, if you choose to itemize, there's a separate list of deductions you can take.
What is the standard deduction vs. itemized deduction?

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How do I know which deduction method to use?

Whether you take the standard deduction or itemize your expenses is a simple math problem. When you add up all of your itemized deductions, your tax bill will be lower if they amount to more than the standard deduction, in which case you should definitely itemize your deductible expenses. If the standard deduction is far more than the amount your itemized deductions add up to, the answer is obvious.
How do I know which deduction method to use?
For most people, the standard deduction is the answer, mostly because the Tax Cuts and Jobs Act of 2017 just about doubled the amount people can deduct. Again, your business expenses are not a factor in this decision – those you can deduct separately.

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What are small business tax deductions?

The standard deduction vs. itemized deduction question only applies to the income you make if a company employs you, and you receive a W-2 tax form every year. But if you're self-employed, both the taxes and the deductions are different. Every self-employed individual, freelancer or independent contractor has to pay self-employment taxes. But they also get to write off every business expense, which can reduce their taxable income and make their tax bill easily manageable. A lot of self-employed people don't know it, but you can deduct these expenses even if you have W-2 income and take the standard deduction on it. Some confusion on this only natural. When you've got personal itemized deductions and itemized business deductions, it's easy to get them mixed up. Understanding the difference between the two is easy, but it can be difficult to keep track of each. Thankfully, there's FlyFin. Give it a try to see what a powerful A.I. can do when it comes to freelancer taxes. FlyFin automatically tracks all your expenses and finds every possible write-off. If you still have questions, human tax experts are waiting to reply with answers.

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What does itemizing mean?

Itemizing just means recording things individually in a list. It's a way to single out all of one thing, like deductions, for example. Itemized deductions are the individual expenses the IRS allows to be deducted from your taxable income. It's not always easy to know exactly which itemized expenses are qualified small business tax deductions, which is why tools like FlyFin can be invaluable time and money savers. There are several categories that every freelancer should be aware of, helpful tools or not:
What does itemizing mean?

Home office expenses

Car expenses

Travel expenses

Advertising expenses

Continuing education

Licenses and registration

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What’s FlyFin?

FlyFin's A.I.-enabled automatic deduction tracker finds all qualifying deductions using your bank statements and can quickly pinpoint dental expenses. It deals with the tax needs of gig workers, freelancers, independent contractors and sole proprietors. But anyone can file taxes through FlyFin! FlyFin tracks all your business expenses automatically using A.I. to find every possible tax deduction. Then, our CPA team files a guaranteed 100% accurate tax return for you – to save you a couple thousand dollars and a ton of time on your taxes. Download the FlyFin app and have your taxes filed in less than fifteen minutes, saving time and more money on your taxes than last year, guaranteed.
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