You've almost certainly heard someone in your life say, "That's a tax write-off," when they're talking about buying things for their business or giving you financial advice (whether you've asked for it or not). And it's true; write-offs can make a huge difference in the tax you pay. But write-offs can be pretty complicated. It takes time and effort to plan how to take full advantage of a write-off, because there are certain expenses that can be written off and some that can’t. What people should really be saying is, "How do tax write-offs work?" Key takeaways:

Tax write-offs are business expenses that can be deducted from gross income
Self-employed individuals can use tax deductions to lower their taxable income
Tax write-offs are reported on Schedule C (Form 1040)

Table of contents

What is a write-off?...Read more

How does a tax write off affect my tax payment?...Read more

What are tax deductions?...Read more

Write offs vs. the standard deduction...Read more

What is a write-off?

When people throw around the words "tax write-off," they usually mean an expense they've incurred for their business, which is also the definition of tax-deductible. Whether you’re a small business owner, independent contractor or freelancer, there are business expenses you can deduct from your earned income throughout the tax year, which can decrease your tax bill. Let’s break this down with a tax deduction example. Say you run a landscaping business as a sole proprietor, and want a website to add legitimacy to your brand and a way for potential customers to easily find your business. All the startup and hosting expenses for that website are deductible from your taxable income. Expenses like this can seriously add up, and write-offs are there to help small businesses and independent contractors handle them without breaking the bank. When filing your tax return, you can subtract the entire cost of building and maintaining your website from your overall taxable income. This could help you stay in a lower tax bracket and a lower tax payment.

Image shows IRS tax rates for different income brackets for Single, Head of Household, Married Filing Jointly or Separately. No mention of self-employed, 1099, freelancer or taxes.

How does a tax write off affect my tax payment?

Let's say you started a business baking and selling pastries to local restaurants last year, and made $20,000 during the tax year. To start the business, you needed to rent a commercial kitchen, purchase supplies and set up a website. The total cost of those combined business expenses is $5,000, and they can be counted as write-offs. To deduct them from your taxable income, you simply subtract them from your overall income. You now have a taxable income of $15,000 and a lower tax bill. The above tax deduction example shows the importance of taking advantage of every possible write-off. This is especially helpful if you owe the IRS over $1,000 in taxes and have to make estimated quarterly payments. Using a quarterly tax calculator can help with this. If you end up missing the April 15 tax deadline, you’ll have to pay the IRS a penalty. A tax penalty calculator can help total your owed penalty fees.

What are tax deductions?

When we're talking about how tax write offs work, it's important to understand what exactly tax deductions are and how they work. It all starts with the total amount of money you earn throughout the year, also known as your gross income. Gross income is everything from wages or salary to side income as a freelancer to income from rent or interest. In the US, the tax system has different levels, which are the tax brackets mentioned above. As your gross income increases, you might enter a higher tax bracket, which means you'll be paying more in taxes. A deduction is any amount you subtract from your gross income when paying federal income tax. It is important that you take advantage of all the deductions available to you as it can decrease your taxable income and can even move you into a lower tax bracket. If you’re self-employed, you can use a 1099 tax calculator to find specific tax write-offs related to your industry. You will report these on your Schedule C. Doing this can lower your self-employment taxes (SE tax), which is 15.3% of your earned income. A self-employment income tax calculator can help calculate your owed taxes. You can also deduct half of your SE tax since you are both the employer and the employee. This type of business tax is partly deductible, but you can only claim it if you itemize your deductions on Schedule A and attach it to Form 1040. If you work as a W-2 employee and are also self-employed, you can ask your employer to withhold your self-employment taxes from your income. This is a type of tax allowance that you can claim by filling out Form W-4.

Infographic entitled List of Tax Write-Offs For The Self-Employed listing 10 deductible business expenses.

Property tax is also a deductible expense, but can only be claimed if the taxpayer chooses to itemize their deductions. If you happen to live in a state that levies a sales tax, you can also claim that as a deduction, provided you itemize it.

Write offs vs. the standard deduction

Americans have a choice when it comes to tax deductions. They can either itemize their deductions or take the standard deduction.

Write offs vs. the standard deduction

Image explaining the difference between itemizing and standard deduction for taxes. Itemizing requires more effort but could save more than standard deduction. No mention of self-employed, 1099 or freelancer.

The standard deduction is a single, one-time deduction that the IRS (the Internal Revenue Service) sets each tax year. For 2024, the IRS has set the deduction at $14,600 for single filers and $29,200 for joint filers. If they choose to do so, their taxable income would be $120,000-$14,600, making their taxable income $105,400. That would put them in the 24% tax bracket, meaning that they pay 24% of their taxable income to the federal government as income tax. Or let’s say you’re working as a freelance graphic designer and choose to itemize your deductions. You could find yourself in a different, potentially lower, tax bracket. Itemizing deductions just means looking at the hundreds of business expenses that can be tax-deductible, then looking at your expenses to see what is tax deductible. You can add your deductions together and subtract them from your gross income to get your taxable income. Suppose as a graphic designer you purchased supplies for your home office and internet service, plus had business lunches with clients, attended professional development classes and purchased design software for work. In that case, you can write off all those expenses. Say those expenses amounted to $30,000 throughout the tax year. When the tax year is over, you can subtract those expenses from your gross income, which now comes out to $90,000,putting you into the 22% tax bracket. You’re now paying 2% less in income tax than you would have if you had taken the standard deduction. Keeping track of all these expenses especially if you’re also working as a full-time employee can be overwhelming. By linking your expenses with FlyFin's, A.I. will do all the work for you by finding every potential tax deduction and lowering your self-employment taxes. Expert CPAs are available 24/7 for support around 1099 taxes. You can even request them to prepare and file your tax returns for you.

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What’s FlyFin?

FlyFin is the #1 A.I.-powered tax app for freelancers, gig workers, independent contractors and sole proprietors. For taxpayers who want to save more by itemizing their deductions, FlyFin tracks all their business expenses automatically using A.I. to find every possible tax write off. Then, FlyFin's CPA team files a guaranteed 100% accurate tax return for you – to save you a couple of 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 more money on your taxes than last year, guaranteed.