It’s no secret the IRS has made filing taxes very difficult. They have. It’s just fact. They also will not be forthcoming in telling you what deductions you qualify for so you’ll at least need to learn some basics on your own and consult a CPA if you have any concerns.
Here are a few examples. (This is not official advice!)
The IRS allows a $5,000 deduction the first year of your business for start-up costs. Example: you’re a rideshare driver and you’ve got to get your car up to Lyft’s standards before you can officially hit the road, the charges you incur with that would qualify as start-up costs.
The IRS allows for mileage, lodging and meal expenses. If you drive for Uber or Lyft and you’ve traveled out of town (for example – you’ve left your home town to drive somewhere else during a special event), then you can use these deductions. NOTE: Keep track of your expenses carefully! Write it down, save receipts…leave no room for doubt with the IRS.
Health insurance can be insanely expensive but if you’re self-employed, you’ll likely find yourself having to pay for it out of pocket. The deductions that qualify: health/medical, long-term healthcare and dental. If you’re a rideshare driver/self-employed individual, you may qualify for substantial health insurance deductions for you and your family.
TAX PREP FEES
Little known fact: you can deduct your tax prep fees if you use a tax prep service, buy software or hire a CPA. As a self-employed business owner, you can deduct tax prep earnings from business earnings instead of having to itemize.
IRA CONTRIBUTIONS (Simplified Employee Pension IRA)
Typically, self-employed individuals are responsible for their own retirement plan. One of the choices available is setting up an SEP IRA. Under this option, a business owner is allowed to contribute up to 25% of his/her earnings per year. There is a cap so you’ll want to research first to make sure you stay within the limit. All of the funds you put into your IRA are tax deductible.
Fees, fees…banks dig fees! Some fees are deductible. For example, if you open a credit card through your bank, the card is used for business purposes only and the card has an annual fee of $100, that fee is deductible.
Naturally, it’s a wise move to consult a CPA if you have questions about deductions you may qualify for. Just make sure if you do, you find one who is familiar with 1099 income.