Tax Deductions for Contractors and Self-employed Business Owners
This check list is in the following categories:
These expenses can reduce taxable income and self-employment tax for contractors and those who own a business.
Use this checklist as a reminder of what business expenses tax deductions need to be kept track of and provided to your tax professional. Keeping good records is essential for Contractors and Self-Employed Business Owners. Just a few
more deductions for you as a self-employed business owner could mean paying a lot less tax.
Mileage tax deduction
For many contractors, this is their main expense deduction.
The IRS requires a written log of all business mileage which includes:
- date vehicle was used for travel
- purpose of travel
- total miles driven to all business-related locations (beginning and ending at your home.)
This includes cost of a website (web hosting, domain name renewal, SSL certificates) as well as other forms of advertising.
Amount paid to employees or non-employees.
If more than $600 was paid to a non-employee, you must file at 1099-Misc for with the IRS prior to February 1st.
Cost of tools, office furniture, or equipment needed for the business that is expected to last more than one year.
Include the date item was put in service.
If you have employees, cost of benefits you provide.
Interest paid on a business loan or mortgage
You can claim the entire mortgage interest if the business is located outside your primary residence. If the business is located in your home, you will need to calculate the percentage of home used regularly and exclusively
for the business and use that percentage of the mortgage interest as a business expense.
Cost of legal services
Cost of tax preparation fees
This includes tax preparation fees to prepare the Schedule C (profit or loss from business), Schedule SE (self-employment tax), Form 4562 (depreciation and amortization), Form 8829 (business use of home), and any other
tax forms relating to the business.
This including postage and office supplies.
Rent or lease payments for equipment or vehicles used solely for the business
Cost of equipment repairs
This does not include repairs to an office that is located in your home. The cost of those repairs are listed on Form 8829 (expenses for business use of home.)
Cost of business license
Amount paid for state tax, excise tax, or sales tax
Travel expenses when traveling outside your local area.
If you need to travel more than 50 miles from your business location and thus incurred travel expenses (including air travel, hotel, taxi service, gratuity, etc.) you can claim the percentage that was used for business.
If part of the travel was for personal reasons or pleasure, allocate the business percentage of the total expense.
The cost of food and entertainment purchased at a business meeting
A record of the topic discussed or minutes of the meeting and names of people in attendance are a good idea if needing to prove the validity of this expense.
Since receipts tend to fade over time, it is also a good idea to re-write the date and amount of the bill on the receipt.
There are several exceptions to the tax rules related to business meals and entertainment.
Business phone expense
In order to deduct business calls, the phone or cell phone plan needs to be listed with the name or the business. If the business is located in your home, only the 2nd phone is able to be claimed as used for business.
Wages paid to employees
Other expenses such as:
Professional memberships, training and education, subscriptions, books and publications, gifts of no more than $20 per person, and other miscellaneous expenses.