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How To Claim Tax Write-Offs with FlyFin?
How To Claim Tax Write-Offs with FlyFin?
Stressing about paying your self-employment taxes this year? Tax write-offs may be the golden ticket you’ve been waiting for. So, what is a tax write-off? The IRS allows every American taxpayer the option to claim some of their business expenses as tax deductible and as a result, lower their taxable income.
In addition to the standard deduction that you can use for claiming personal expenses (the amount of which will depend on your filing status), if you're self-employed you can also write off certain business expenses and bring your tax bill down even further.
If you’re a full-time employee at a company but also do some freelance work on the side, you can deduct any business related expenses you might have incurred throughout the calendar year to bring down your taxable income.
What is the definition of a write-off? How do tax write-offs work? How much meal can I write off? Is every expense your business has a write-off? What can I write off on taxes? What is a tax write-off? This guide will answer all these questions.
Table of contents
Key takeaways:...Read more
How do tax write-offs work?...Read more
What can I write off on taxes?...Read more
Is every expense your business has a write-off?...Read more
How much meal can I write off as a business deduction?...Read more
How to report write-offs when online tax filing?...Read more
Who can claim tax write-offs?...Read more
Key takeaways:
- A write-off is any expense that is ordinary and necessary to a business.
- You can claim tax write-offs on Schedule C.
- FlyFin’s AI handles finding every possible deduction for you by the tax filing deadline.
How do tax write-offs work?
If you’re trying to define a write-off, tax write-offs are any expense that the IRS sees as “ordinary, necessary, and reasonable.” This means that the expense you are claiming as a deduction has to be a common expense in your industry and something that helps you make money.
Tax write-offs are also known as tax deductions, and they reduce your taxable income. This is different from tax credits, which are also available to every taxpayer, but reduce the amount of tax that you owe, rather than the amount of income that you must pay tax on.
If you sell personalized sweatshirts on Etsy and buy some fancy thread to make your embroidered designs look better, you can write off that cost as tax deductible because it is essential to your business generating income.
But how do you know which expenses you can write off? That’s where FlyFin comes in. Just link your expenses, and our AI tax engine takes care of the rest, automatically finding every possible deduction that you can write off your taxes, saving you both time and money.
Any work you perform as a freelancer, gig worker, independent contractor or self-employed individual, will get you a 1099-NEC form from each entity that pays you. 1099-NECs report the income that you earned to the IRS, and you should receive a copy of each one, which you can use to calculate your gross income on Form 1040.
To figure out your net income, which is the income you’ll actually be taxed on, you need to first enter all your business expense deductions. And where do you record these tax write-offs? They go on a form called Schedule C. You will attach this to your Form 1040, which is the standard form that every taxpayer uses when filing taxes.
Remember that every self-employed individual also has to pay estimated quarterly taxes to the IRS if they think they’ll owe more than $1,000 in tax for the year. You should calculate this amount on Form 1040-ES by the tax filing deadline. Failure to pay this can get you in trouble, and you could be hit with some steep penalty fees.
What can I write off on taxes?
As a self-employed person, you have to pay self-employment tax, also known as FICA (Federal Insurance Contributions Act) tax, which is 15.3% of your net income. This includes the tax amount for both Social Security tax (12.9%) and Medicare tax (2.4%), and you can calculate exactly how much you owe the IRS by the tax filing deadline with this self-employed tax calculator.
To help small businesses be successful, the IRS allows certain business expenses to be deducted as 1099 tax write-offs. These itemized tax deductions can help lower your taxable income, but you’ll need to keep a pretty thorough record of all your expenses throughout the year to make the most of them.
There are hundreds of available tax write-offs to choose from, you just have to make sure that you’re following the exact IRS guidelines when claiming that expense, otherwise you will risk getting audited.
Let’s say you work from home as a social media manager. If you have an area in your house that you use as a home office, you can deduct the business expenses associated with it as a tax write-off. But you can only do this if you use that area exclusively as a workspace.
Regardless of whether it’s a separate room or just a desk in the corner of your living room, you cannot do anything that is not “work-related” in that space. If you eat, socialize, or entertain in that space, you cannot claim it as a write-off when you’re filing taxes.
If you’re still not sure what you can write off, use this 1099 tax calculator and find out exactly what counts as a 1099 tax write-off in your line of work.
As you can see, there are certain benefits to being self-employed. Writing off business expenses is an easy way to reduce your tax bill, as long as you are prepared to keep track of your expenses throughout the year.
Is every expense your business has a write-off?
Not every expense your business has is a write-off. A write-off is a business expense you can subtract from your income, reducing your overall taxable income. For example, if you’re an independent contractor and receive a 1099 form, you’ll be eligible for specific 1099 tax write-offs.
Common write-offs include things like office supplies, internet and even the cost of driving to meetings for work. However, personal expenses, like groceries or vacations, can’t be written off.
It’s common to have expenses each year that don’t qualify as tax write-offs and can’t be deducted on your taxes. Even if an expense seems legitimate, it may not be eligible for a deduction. Some examples of expenses you can’t deduct include child support payments, alimony payments from divorce agreements made after December 31, 2018, and political contributions.
Contributions to a 529 plan, which helps with future education costs, are also not deductible on federal taxes, though some states may allow a deduction. Additionally, if you contribute to a Roth IRA, you won’t be able to deduct that from your federal taxes either.
It’s important to know the difference between deductible and non-deductible expenses so you can avoid any surprises when you file your tax return. Keeping track of what you can and can’t write off will make filing your taxes easier and help you avoid mistakes.
If you’re wondering how to determine what counts as a write-off, it’s helpful to know the IRS has guidelines to define write off eligibility. Using IRS free tax filing tools or free online tax filing services can help you navigate these rules.
For example, if you purchase a new laptop strictly for business purposes, that’s a valid tax write-off. But if you buy the same laptop and use it mostly for personal activities, it wouldn’t count.
A freelance graphic designer might buy software like Adobe Creative Cloud, which is necessary for their work. This expense is a legitimate write-off. However, if they buy a new phone and use it mostly for personal use, that wouldn’t qualify.
How much meal can I write off as a business deduction?
You can typically write off 50% of meals as a business expense. If you’re meeting with a client, colleague, or partner and discussing business, that meal can count as a tax deduction. Let’s say you meet a potential client for lunch to talk about a project—you can deduct half the cost of that meal. If the meeting happens near the end of the year, it's a good idea to make sure the meal is counted in that year’s taxes to avoid missing the tax filing deadline.
A small business owner takes a client out to lunch to discuss a potential contract. The bill is $100. Since it was a business meeting, $50 of that meal can be deducted on the tax return. However, if the business owner later has dinner with a friend just for fun, that dinner is not deductible.
Meals that qualify as tax write-offs are those related to business. But if you’re having dinner with a friend and there’s no business involved, that meal wouldn’t count. Knowing what is a write off can save you from over-claiming, which the IRS frowns upon.
How to report write-offs when online tax filing?
When it comes to online tax filing, reporting write-offs is simpler than it may seem. Many tax platforms guide you through the process, asking questions to make sure you get all the deductions you qualify for.
You’ll need to categorize your write-offs properly—common categories include office supplies, travel and meals. If you’re self-employed, this is especially important for reducing your taxable income.
FlyFin handles the entire tax filing process by using AI to find all your deductions. The app also has a built-in income tracker, tax calculators and expert CPAs who provide unlimited support and can prepare and file your returns. Small business owners get access to the Ultimate Plan subscription that caters to small businesses and business deductions.
A photographer who drives to different shoot locations may deduct mileage as a business expense. They log their miles in a notebook throughout the year, then report this in the "Travel Expenses" category when using an online tax filing service. This helps lower their overall taxable income and increases the chances of getting a refund.
If you’re worried about missing the tax filing deadline, there are many free online tax filing services you can choose from that offer features that help you file on time and accurately. Using the IRS free tax filing option is a great choice if your income qualifies, and it includes a straightforward way to report your business write-offs. Just make sure you qualify for the service.
Who can claim tax write-offs?
If you run a business or are self-employed, you can claim a variety of tax write-offs. For example, a dog walker who buys leashes, treats, and travel gear specifically for their dog-walking business can claim those as 1099 tax write-offs.
These are expenses directly tied to earning their income. Even if you work from home, you might be eligible to write off a portion of your rent, utilities or internet costs through the home office deduction.
If you’re not self-employed, but you still have certain qualifying expenses, you can claim deductions, too. For instance, if you moved for a new job, some of your moving expenses might be deductible. Or, if you’re a teacher, you can write off the money you spend on classroom supplies. Knowing how to define write-off is key to understanding what expenses you can claim. A freelance photographer who drives to different shoot locations can write off mileage and even camera equipment repairs. But if they buy a new lens for personal photography, it won’t count.
As a sole proprietor, you might qualify for the 20% Qualified Business Income Deduction, which lowers your taxable income. You can also fully deduct the cost of business equipment up to $1,220,000 in 2024, as long as the equipment is used for your business in that year. If you use a heavy SUV for your business, you may be able to deduct up to $30,500 for it in 2024, if it qualifies.
If you’re unsure what counts as a write-off, getting some tax pro help can help guide you through the process, making it easier to report the right expenses and reduce your taxable income.
What’s FlyFin?
FlyFin caters to the tax needs of freelancers, gig workers, independent contractors and sole proprietors.
But anyone can file taxes through FlyFin! FlyFin tracks all your business expenses automatically using A.I. technology.
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.
In addition, you can download the FlyFin app and have your taxes filed in less than fifteen minutes, saving time and money.
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
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