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Tax Deductions for Self-Employed Individuals (2023 Edition)

Self-Employed Expenses Checklist

Here are a variety of tax-deductible items available for the self-employed. Income taxes and self-employment taxes are usually the biggest single expenses for the small business owner. Keep records of your expenses and be aware of what deductible items are available and you can greatly increase your net income.

Tax Deductible Items for the Self-Employed can include:

Tax Deductions – Home Based Business 

If you are running your business from your home, a percentage of the costs of owning or renting your home may be deductible. The tax deductions for a home-based business are generally calculated by dividing the exclusive and regular business use area by the total living area of your home. The business space does not have to be a full room, but it absolutely must be exclusive. You cannot use the area at any time for personal use, even if the personal use is just a day or two of the year.

For example, if your home office is 200 square feet and your home is a total of 2000 square feet, then your deductible percentage is 200/2000 or 10%. (Note that daycare businesses will use a formula based on the number of hours they make the home available to the children.)

Common tax deductible expenses for a home based business:

____ Mortgage interest, real property taxes, PMI insurance

____ Utilities, such as natural gas, electric, propane

____ Trash service, pest control service

____ Home insurance

____ Regular maintenance of the home

____ Depreciation of the business part of the home

Refer to IRS Form 8829 – Expenses for Business Use of Your Home

Business Use of Your Personal Vehicles  

 Another of the potentially large deductible self-employed business expenses is the business use of their personal passenger vehicles.

There are basically two ways to calculate this. Calculate the deduction both ways the first year to see which one will give you the biggest deduction. For either method, you must keep a log of your business mileage to substantiate the deductions.

Standard Mileage Deduction

The standard mileage rate for transportation or travel expenses is 65.5 cents per mile for all miles of business use (business standard mileage rate) If your business is home-based, then virtually all business mileage is deductible. If your business is not home based, then you may not take a deduction for the mileage from your home to your principal place of business. Any other business-related mileage should be deductible. This includes mileage to pick up supplies, to do your business banking, to make deliveries, to visit customers or potential customers, to the post office, to meet with the accountant or attorney, and to stores or business suppliers.

_____ Standard mile deduction ________ miles x $ ________ per mile = $__________

Actual Vehicle Expenses

This is based on the percentage of business use of your vehicle. For example, if you drove a total of 10,000 miles in 2018 and 2000 of those were deductible business miles, then 20% of the vehicle expenses are deductible.

This will include:

____ Depreciation of the purchase cost of the vehicle

____ Insurance

____ Interest

____ Auto license plate fees and taxes

____ Oil changes and other regular maintenance, tires

____ Car washes

____ Gasoline or other fuel

____ Repairs – these may need to be depreciated. Check with your accountant.

Other Potential Self-Employed Expenses

 ____ Advertising

____ Commissions paid

____ Contract Labor

____ Interest on a business loan

____ Parking and tolls for business travel

____ Equipment purchases – these usually are depreciated or expensed with a Sec 179 deduction

____ Accounting and legal fees for the business

____ Health insurance premiums – special rules apply. (Deduct on the front of Form 1040.)

____ Office Supplies

____ Business liability insurance

____ Rent of business equipment

____ Rent or lease of storage facilities

____ Rent or lease of business space

____ Maintenance and repairs of equipment or business space

____ Shop supplies

____ Business property taxes

____ Business travel – hotel, parking, air and bus fares, taxis

____ Internet service (percentage of business use)

____ Web site hosting, design, and domain names

____ Cell Phones (percentage of business use)

__ Telephone – the first line coming into a home is usually not deductible, even if it is used for business. However, if you add on services for the business, such as call waiting or distinctive ring tones, these may be deductible. A second line for business or a business fax machine is deductible.

____ Long distance phone charges and phone cards for business calls

____ Books, newspapers, magazines for business purposes

____ Association and membership fees

____ Meals and entertainment (these are usually only 50% deductible)

____ Utilities – Electric, heat

____ Cost of inventory items that sold (do not include unsold inventory)

____ Donated inventory – check with your accountant for special rules

____ Merchant fees for your credit card sales

____ Bank service charges on your business accounts

____ Depreciation on the cost of furniture and equipment that you owned before you started the business, such as desks, computers, file cabinets. 

____ Answering services

____ Postage and shipping

____ Education and seminars – must be related to your current business, not for a new career

____ Customer gifts

____ Software purchases

____ Software subscriptions, such as security software

Salaries and Wages Paid to Employees

You’ll need copies of W-2 and W-3 forms, 1099-NEC and Form 1096 forms along with federal and state payroll returns  Form 940.


Charitable Contributions

Keep a detailed list of donations. You must have receipts for contributions over $250 and a

Form 1023 for vehicle donations.

Health Care Expenses

Keep records of medical and dental costs.

Alimony Expenses

Provide ex-spouse’s full name and SSN.

Education Expenses

These include Forms 1098-T (tuition statement and itemized receipts of educational

expenses) and 1098-E (student loan interest statement).

Child and Dependent Care Expenses

Be sure to get the name, address and tax ID or SSN of the provider.

New Health Insurance Tax Credit

 For small businesses enrolled in a Small Business Health Options Program, a credit for health insurance premiums paid may be available. In general, you must have fewer than 25 employees, pay at least 50% of their premium costs, and their average annual pay must be less than $50,000.00. The credit can be as much as 35% of the premiums if you qualify. Refer to Form 8941.

Ask About Other Self-Employed Tax Deductions

We can help you find tax deductible items. During your tax preparation appointment, bring in any items that you are not sure are deductible so that we can review them. Be sure to ask us what tax deductions are generally seen on a tax return for your business. If you prefer to prepare your own tax return, we are happy to schedule a consultation to be sure that you are taking advantage of every tax deductible item that you are entitled to and to review your small business profits.

 This checklist helps the self-employed business owner to be sure that they have not forgotten any business tax deductions on their tax return. Identifying deductible items for self employed taxes may be the single most powerful activity that a small business owner can do to increase their available income.

Print this article and use it as a checklist to help you take all the deductible self-employed expenses on your tax return.

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