Top 6 Tax Write Offs for Self Employed Professionals

The ability to manage your business expenses is a good income strategy. As a company of one, you will incur fixed costs that cannot be billed back to clients. You’ll also need to handle expenses such as health care, retirement funds, and other benefits typically provided by an employer. Each of these fixed or variable costs can be a drain on your income, but managing them well can lead to opportunities to write off expenses—putting more money back in your pocket.

While there are many tax deductions available to independents, here are six categories of common expenses you should consider tracking. In each of these areas, keep detailed records or receipts to ensure proper deduction at the end of the year.

1. Marketing Your Business

Your business marketing strategy is a big part of landing new clients and maintaining steady growth. While there are many marketing activities that can be done for free or low cost such as blogging or social networking, other activities require a bigger financial investment. Independents can generally deduct advertising and promotional expenses directly related to business activities such as paying for an ad, purchasing business cards, or hiring someone to create your personal website.

2. Office Equipment and Space

If you work from home and have a workspace exclusively dedicated to your business, you can deduct this as a home office expense. There are a few ways to do this—a simplified method based on square footage, or the regular method that requires additional calculations.

You can also deduct office equipment related to your business such as your computer or laptop, and supplies like pens, printer ink, paper, and software.

3. Insurance and Retirement Benefits

As long as you aren’t eligible through a spouse’s plan, you can deduct your medical, dental, and qualified long-term care insurance premiums for yourself and any dependents.

Retirement is another great tax advantage, and there are several self-employed retirement options. Tax-deductible plans include Solo 401(k), SIMPLE IRA, and SEP IRA.

4. Professional Development

Educational expenses are tax deductible as long as they are related to maintaining or improving skills related to your business or are required by law to maintain a specific license, status, or job. Taking an online course, pursuing a certification, or enrolling in a local college class with the intent to do your job better are all ways to utilize this deduction.

Non-deductible education expenses include education required to meet the minimum educational requirement to qualify you in your trade or business (obtaining a specific license if you don’t already have it), or education that will qualify you for a new trade or business.

5. Business Development

There are a series of miscellaneous costs that are deductible, many of which can be attributed to growing your business. For example, if you use your car for business, you can deduct the dollar value of business miles traveled. Just be sure to keep detailed records for accuracy.

Tax deductions are a big perk to independence, but they can get complicated. If you have questions about how to make the most of your eligible deductions, we’re here to help.

6. Travel Expenses

When you travel for work, you can write off your travel costs. The deduction, however, cannot be exorbitant or wasteful nor may it be utilized for private purposes. Airline tickets, taxi or ride-sharing fees, hotel and housing costs, luggage fees, and dry cleaning costs are a few examples of travel expenses.

To Learn more: 9 Self-Employed Tax Deductions You May Overlooking

The information provided in the MBO Blog does not constitute legal, tax or financial advice. It does not take into account your particular circumstances, objectives, legal and financial situation or needs.  Before acting on any information in the MBO Blog you should consider the appropriateness of the information for your situation in consultation with a professional advisor of your choosing.