7 Tax Deductions Every Self-Employed Worker Should Know

There are a host of tax deductions available to self-employed individuals that can generate real savings when filing your tax return. As you prepare to file your 2021 taxes, here are a few deductions you should be mindful of:   

  1. Home office expenses: If you’re using an area of your home regularly and solely for business, you may be able to deduct expenses for a home office from your taxable business income.  A woman sits at her desk in front of a laptop, with an open notebook beside her. A rack of clothes hang behind her.

  1. PPP expenses: If you received a Payroll Protection Program loan either in the first or second round of funding, business expenses applied against the forgiveness of the loan are generally deductible.     

  1. Office supplies: Hang on to those receipts for pens, paper and printer ink as you may be eligible to deduct the total cost of your office supplies.   

  1. Social Security: Remember that if you’re self-employed, you’ll be paying more Social Security taxes than if you were on the payroll of a company. You can, however, deduct half of these taxes on your return.   

  1. Vehicle expenses: The pandemic may have wiped out conferences and reduced the number of miles traveled for business, but that doesn’t mean you shouldn’t take advantage of existing deductions available to you. If you use your vehicle for business, you can still deduct either the actual expenses or the standard mileage rate of 56 cents based on the business use of the vehicle.    

  1. Section 179: This allows profitable business owners the opportunity to deduct up to the full cost of qualifying capital assets — like furniture, equipment and technology — immediately rather than depreciating them throughout their use. Any unused deductions can be carried forward and put toward next year’s tax return.   

  1. Food and beverages: The stimulus bill passed in December 2020 changed the deduction for meals, allowing businesses to deduct 100 percent of their qualifying food and beverage expenses if purchased from a restaurant in 2021 and 2022.   

Curious about what deductions you might be eligible for on your 2021 tax return? At Padgett, our talented network of CPAs, Enrolled Agents and tax professionals can help you navigate the confusing world of filing your taxes. Find an office near you today and let’s set up a time to talk.   

Do you have the support you need to manage your small business bookkeeping? Contact us to schedule an appointment to speak with a local small business advisor.