Every year, independent workers pay more in taxes than they should because they’re not taking advantage of deducting their business expenses. Here are five common tax deductions that most independent workers can take to lower their tax bill—but first, let’s take a look at how tax deductions actually work.

What are tax deductions and how do they work?

The amount of tax you owe is a percentage of your taxable income, which is the amount of your total income that’s subject to taxes. Tax deductions—sometimes called write-offs—are business expenses that you can subtract from the total income you report on your tax return, which lowers your taxable income. The lower your taxable income, the less tax you owe.

By understanding which expenses you can deduct and tracking them throughout the year, you can save yourself thousands of dollars in taxes. Let’s take a look at some of the most common expenses independent workers can deduct. 

5 common tax deductions for independent workers:

1. Driving expenses

If you drive for your independent work—like delivering food or groceries, rideshare driving, or driving to meet with clients—you can deduct the expense of that driving from your taxable income. 

You have two options when it comes to taking driving deductions:

1) You can deduct your actual car expenses like gas, maintenance, and insurance, or

2) You can take the “standard mileage deduction,” which is a flat rate per mile driven for business. Every year the IRS publishes the standard mileage rate, and in 2022 that rate is 58.5 cents per mile. 

Whichever method you use, be sure to keep a running list of your expenses or miles driven. You can do this the old-fashioned way by writing it down on paper and keeping all of your paper receipts in a shoebox, or you can make it easy on yourself and use an expense & mileage tracking app.

The free Stride app records your miles as you’re driving, lets you upload pictures of your receipts so you can toss the paper ones, and tracks all of your business expenses. It even suggests other expenses you can deduct and estimate how much money you should be setting aside each week to pay your taxes.

2. Medical expenses

If you spend more than 7.5% of your income on medical expenses throughout the year, you may be able to deduct some of those costs at tax time. Doctor visit fees, hospital bills, prescriptions, and even your monthly health insurance premiums are all deductible expenses.

3. Work supplies

Anything you buy to keep your business running—from common office supplies like pens, paper, and envelopes to things like doggie poop bags for dog walkers, bottles of water for rideshare drivers, or cleaning supplies for housekeepers—could be deductible. Just be aware that supplies are only deductible if used exclusively for your business, so keep your supplies (and the receipts for them) separate from your personal supplies.

4. Mobile phone

If you’re using your cell phone for business, you can deduct a portion of the cost of the device and the wireless plan proportionate to the amount you use them for business. For example, if you use your phone for business 60% percent of the time, you could deduct 60% of your phone costs as a business expense. You’ll need to keep your bills as evidence to back up the business use, such as the number of hours spent using data.

5. Computer, internet, and subscriptions

If you use a computer, keyboard, mouse, printer, software, subscription services, and/or the internet for business, those expenses are deductible too—at least in part. Just like with mobile phones, the amount you can deduct is equal to the amount of usage that’s for business purposes, so be sure to keep track of your business and personal usage since you’ll need to provide records to support the deduction. 

These aren’t the only expenses you can deduct!

Depending on what type of work you do, there could many more deductions you can take to lower your taxable income and, as a result, lower the amount of tax you owe. Check out Stride’s free tax deduction guide to see a list of deductions you can take based on the type of work you do, and it’s probably a good idea to consult a tax professional to confirm what you can deduct from your tax bill since everyone’s circumstances are different. 

Remember: keeping good records can save you thousands

The key to maximizing your tax deductions is keeping good records of your business expenses. Consider using a Stride's free expense tracking app throughout the year so you can save time recording your expenses and submitting them at tax time.

Tax deductions are a perfectly legal way to lower the amount of tax you need to pay every year, so be sure to take all of the deductions you deserve and don’t pay more tax than you owe!