Top 3 most commonly missed tax deductions
After the chaos of tax filling season has settled, it’s easy to close the books on all things tax-related until next year. But, when you’re self-employed, every day brings a new tax-related challenge. These can range from putting aside money for next year's filling, organizing your receipts, or looking for deductions!
At Stride, we’re in the business of helping self-employed taxpayers find the expenses that can and should be deducted. We've done the research for you, and here are a few of the biggest expenses that self-employed folks commonly miss (but that really add up!).
A portion of your cell phone bill
Newly self-employed taxpayers often use their own assets to get their businesses off the ground. This can include a vehicle, a section of one's home, or most commonly, one's cell phone. When you use your own property to maintain your business, you can deduct a portion of the asset’s upkeep!
For cell phones, the “business percentage” of your monthly bill can be deducted as a business expense. “Business percentage” means the portion of your bill that’s attributable to your business.
Finding the business percentage use of your cell phone can be tricky, but it can save you hundreds of dollars.
Here’s how to get started:
1. Take a look at your phone bill from a typical month that shows a breakdown of your monthly usage.
2. Look through your calls, texts, and data usage to see how often you're using your phone for work vs. person usage.
3. Take that percentage and apply it to all of the other months when you've used your phone for work!
If you look through your cell phone bill and find that you’ve used it for work about 60% of the time in your most “average” month, you can reasonably deduct 60% of your cell phone bill from each month in which you’ve used it for work!
Running your own business comes with a huge set of risks, so protecting yourself against these risks is not only important but also deductible.
Business insurance can include fire, theft, flood, malpractice, errors & omissions, general liability, and workers compensation. If it protects your business, it’s deductible.
The same goes for self-employed drivers who purchase additional business insurance through their commercial car insurance providers. This is especially common for rideshare drivers who work with Uber and Lyft.
Insurance that's specifically for your rideshare activity and for nothing else would be deductible. Keep in mind that you can only deduct the portion of your insurance that covers you while you’re working.
For example, if you have regular commercial car insurance, and then an additional policy that covers you for your rideshare work, you could only deduct the rideshare portion of your insurance.
When you’re getting a business off the ground, chances are you'll be networking often--and that can get expensive. You'll rack up a pretty big bill by meeting just 5 potential clients over coffee each week.
If your food or drink expense has a business purpose, then it’s partially deductible. Meals are limited to a 50% deduction, so the $20 meal that you shared with a business contact will get you a $10 deduction!
Careful! Meal expenses are a highly scrutinized item on your tax return. Be sure to keep diligent records of all of your business-related food and drink expenses!
This means you've got to keep your receipts and should even jot down a few notes on the purpose of the meeting. The goal is to give an auditor no reason to second guess the legitimacy of your deduction.