Standard vs Itemized
Maximize Your Tax Saving with Business Expenses Deduction
Use this calculator to check if you should choose itemized deductions over standard deduction method
Step 1/4
Are you a freelancer or business owner?
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:
- 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 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 set amount that 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. You should try and claim all the deductions that you're eligible for so that you can get your taxable income as low as possible. This is especially important when you're paying estimated quarterly taxes.
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.
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.
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. An independent contractor taxes calculator can help you fins deductions you can claim.
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.
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:
Home office expenses
Car expenses
Travel expenses
Advertising expenses
Continuing education
Licenses and registration
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.
Expert tax CPAs ensure 100%-accurate tax filing
A.I. finds every tax deduction, eliminating 95% of your work
On average users save $3,700
Was this tip useful?
Yes
No