Last month in this space, we discussed five important areas that you can consider as tax write-offs if you’re an independent contractor. These deductions can often make a huge difference for your bottom line come tax season.
At Equinox Business Solutions, we’re experts in tax preparation for independent contractors. Let’s go over another set of five deductions that could be very valuable for you this year.
As an employer, you can offer employees up to $5,000 in dependent-care benefits. If, for instance, your spouse is your employee as in the case of many contractors, you can use that money for your own children’s care. These benefits are excluded from wages, so you can deduct them. They’re tax free for any employee, even if this person is your spouse.
If you keep detailed records, this can be a potentially huge deduction. The standard mileage rate is one deduction you can take, but if you use actual expensing, you can get even higher deductions. This is a more detailed process that involves deducting yearly costs of operating your car for work – including things like maintenance, insurance and even car washes.
If you use this method, be aware that transportation write-offs are often audited by the IRS. Be very detailed in your records, and be sure to separate personal use from business use.
Travel also falls under areas the IRS will scrutinize heavily, but if you keep good track of your records, you can get great deductions. You can write off hotels, air travel and even 50 percent of your meals on business trips. And if you spend a longer period on business than pleasure on a given trip, you can even get a few fun days written off as well.
Whether you work at home or in an office space, having it cleaned is an expense you can deduct. If you want to get really creative, you can pay your own child to clean your workspace, and then deduct this later on. Children under 18 are exempt from Social Security tax, so this can be a great way to make a contribution to an IRA for them.
Finally, health insurance is deductible if you’re an independent contractor. Other medical expenses that aren’t covered by your health plan can also be written off, and you can even provide health insurance for an employee (including a family member) if you wish.