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Self-employed

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Freelancer write-offs to maximize your tax savings

You’ve probably heard the words “tax write-offs” at some point. But did you know that tax write-offs are the same as tax deductions? If you’re self-employed, an independent contractor, gig worker or freelancer, one important question you might ask yourself is: how do I reduce my self-employment taxes? By taking tax deductions for the self-employed, you can lower your tax bill. You’ll want to take every possible deduction, or at least every one you’re eligible for, but you might not even know which qualifying items can even count as tax write offs. The Internal Revenue Service (IRS) has certain rules and requirements in place when it comes to tax write-offs for self-employed individuals. We’ll cover everything you need to know about tax write-offs, including details about each item, eligibility requirements and how to make the deductions.

Table of contents

Key Takeaways:...Read more

What are self-employment tax deductions?...Read more

Is FICA self-employment tax?...Read more

What can I write off on my taxes?...Read more

Key Takeaways:

There are key differences between standard deductions vs. itemizing deductions
There are different types of self-employed tax deductions to help lower your tax bill
Tax write-offs are the same as tax deductions

What are self-employment tax deductions?

A tax deduction is something you can deduct or subtract from your taxable income. It lowers the amount of income you're taxed on and helps save you from paying more 1099 tax. It means the same thing as tax write-offs. There are two types of self employment tax deductions: itemized and standard deductions. You can only choose one self employment tax deductions option out of these two. The standard deduction is a flat amount the IRS sets and is adjusted yearly based on inflation. The standard deduction amount depends on your income and filing status. The new standard deduction amounts were updated recently, thanks to the Tax Cuts and Jobs Act.

Infographic entitled Standard Deduction Tax Rates 2023 showing the updated standard deduction for American taxpayers based on filing status.

On the other hand, itemizing deductions lowers your adjusted gross income (AGI). You’ll need to keep records of everything you’re itemizing as proof for the IRS. Records are things like medical bills, car-related receipts or insurance bills.

Quick tip

Itemizing a deduction is not the same as taking a tax credit, which reduces your tax bill. When you itemize your business expenses, you can take tax write offs for things like medical expenses, property taxes and charitable donations.

Is FICA self-employment tax?

The Federal Contributions Insurance Act (FICA) is a federal payroll tax. Usually, it’s deducted from every paycheck when you work for an employer. But, this is also part of the self-employed tax. When you’re self-employed, it’s now up to you to pay FICA taxes, which cover Social Security and Medicare, since your employer won’t be doing it for you. The self employed tax rate is 15.3%, 12.4 % for Social Security and 2.9% for Medicare. Now that you’re the employer and the employee, this self-employed tax is your responsibility.

What can I write off on my taxes?

When you own your own company or gig, there are a lot of business expenses you need to cover. Many of those business expenses can count as tax write-offs. There are many 1099 deductions for things you might not even know are tax write-offs. Vehicle for business use When you use a vehicle for business purposes, you can take this as a deduction. You have two options when it comes to calculating the deduction. You can either take the standard mileage rate or the actual expense deduction. The standard mileage rate is a set rate and for 2024, the IRS updated the rate to $0.67. If you decide to take the actual expense deduction, you’ll need to add up all your vehicle-related expenses like inspection or registration fees, lease payments, tolls, insurance, etc and multiply that number by the number of miles driven during the tax year.

Infographic entitled Business Vehicle Deduction Methods highlighting the difference between the standard deduction method and the actual expenses method

Let’s say you work as a freelance photographer, and have to drive to shoot locations or meet clients for consultations. Since you’re using your car for business-related purposes, you can take this as a deduction. Or you work as a delivery driver for Grubhub. You need your car to make the deliveries, a phone to help you navigate to your location, a work uniform and insulated bags to keep the food hot or cold. Everything from the car miles and cell phone to the insulated bags is counted as business expenses, eligible for tax write-offs. Home office deduction One of the most popular business expenses is the home office deduction. If you work from home and have your own dedicated office space, you’ll be able to apply for this deduction. You must use your home office exclusively for your business, and you can even deduct a percentage of your utility bills, rent and phone costs. Plus you must use the home office regularly. If you’re a gamer and stream from your home office or coach other gamers, your gig is eligible for a home office deduction. Coaching clients virtually with your coaching business can also qualify for the deduction since you need your home office space, computer, headset and microphone to help your clients. But if you work from your home office and are a W-2 employee, you won’t qualify for the home office deduction. Premiums for health insurance Some health or medical expenses are deductible, but not many people are actually eligible for the deductions. You’ll need to itemize the tax write-offs, and you’ll only get a deduction if your expenses exceed 7.5% of your adjusted gross income. The good news for anyone self-employed is you can write off your health insurance premiums, including long-term care coverage and dental). But to count this as one of your business expenses, you must have no other health insurance coverage, meaning your spouse can’t have the option at their workplace, and you have business income. Business meals You can deduct business meals, like meals at a restaurant or coffee from a coffee shop, as business expenses as long as you’re actually discussing business over the meal. There also needs to be a business associate present at the meal. A business associate could be a client, potential client, business partner, agent, advisor or investor. If the meal seems too extravagant, the IRS may raise an eyebrow at the expense counting as a business meal. For the 2024 tax year, business meals are 50% tax deductible. This includes take-out but it doesn’t include groceries or snacks. Sharing a sushi dinner with your spouse, who also happens to be your business partner, and discussing business during the meal would count as a deduction. If you collaborate with other influences over a coffee who will help you with some promotional side of your business, this also counts as a write-off. Let’s say you run a wedding photography business. If you meet with potential clients over pastries and tea to discuss pricing, venue and event details, this qualifies as a business meal. There are a lot of other self-employment tax deductions. Here’s a glimpse at the tax-deductible expenses list:

Infographic entitled Common Self-Employed Tax Deductions listing five business expenses that are tax-deductible for self-employed individuals.

It is important that you take advantage of every tax deduction you can as a self-employed individual and lower your self-employment tax bill. You can do this easily by keeping thorough record of all your expenses, saving receipts and invoices throughout the year. And using tax tools, like a You can also use an app like estimated taxes calculator. You can also use an app like FlyFin to do all the work for you and make tax season stress-free.

Adjusted Gross Income

A lot of terms get thrown around when it comes to the tax season and your adjusted gross income (AGI) is one of them.