One of the biggest perks of being your own boss is the sheer amount of tax deductions for independent contractors. From your phone bill to a cup of coffee while you’re out at a business meeting, it almost feels like there’s no shortage of legitimate tax breaks you can claim on your return.

The challenge lies in finding those deductions, and knowing when to use them. Today, we’ll take a look at the five best deductions every contractor should use.

The Best Tax Deductions For Independent Contractors

One of the most confusing things about self-employment taxes is knowing where the line lies between actual work and a hobby. Understanding that difference makes it easier to identify your best tax deductions.

Once you’ve correctly identified what income counts as self-employment, then you can really work on finding unique exemptions for your next tax return.

Mileage

One of the most popular 1099 independent contractor deductions we see is for mileage. If you’re an independent contractor, chances are you drive a lot. From meetings with clients to trade shows, it’s not uncommon to be on the road often.

If you file your taxes with professional software, it’s easy to identify where and how to deduct mileage.

If you’re not using professional software, it’s worth knowing the rules behind this deduction.

As of 2015, the IRS allowed self-employed filers the chance to claim up to 57.5 cents for every work-related mile driven. That adds up quick, especially when you consider that trips to the office supply store or a lunch meeting with a client count towards these miles.

You do want to make sure you track your mileage, though. There are a ton of apps available that track mileage for you. Come tax time, you’ll want that data in front of you to get the maximum deduction possible.

Occupational Expenses

This is one that’s not used nearly as often as it could be. A lot of people just don’t realize how much they can actually deduct here.

Occupational expenses can be anything used to run the day-to-day operations of your business. In other words, if it helps you do business, it’s a deduction.

Things like printing business cards, website hosting, monthly software payments, internet access, and even improvements to your home office are all considered occupational expenses.

Keep track of what you buy throughout the year. Saving receipts, or saving the bank statements as a PDF, makes it a lot easier to write these expenses off come tax time.

Food

Yes, you read that right. Under certain circumstances, you can write off the cost of food on a fairly regular basis. If you buy snacks, coffee, or other refreshments solely for use in your home office, you get to deduct those costs on your taxes.

Additionally, if you have any employees, you can deduct the price of their snacks and beverages as well.

Not all food gets written off, though. You can’t write off the cost of lunch every day.

However, you can get a meal deduction if it’s a business meal. That means you and a client need to be present. If you have employees, a weekly lunch counts as a business meal.

Another food perk to remember is that you can write off meals while traveling for work. Most all traveling expenses (when you’re on a work trip) are guaranteed deductions.

Medical

One of the more popular 1099 contractor deductions is any and all medical expenses.

Everyone knows how expensive healthcare is, but independent contractors don’t have the luxury of an employer-subsidized plan. That does make them eligible for other healthcare options, though.

Either way, medical expenses are a legitimate tax deduction that’s not hard to take advantage of. Your premiums, plus all individual costs associated with a visit to the doctor, are eligible for a write-off.

On top of that, you can even write off medical expenses if you’re on Medicare. Not all Medicare plans qualify, but enough do that it’s likely you’ll be able to write off some, if not all, of your medical expenses on a yearly basis.

Social Security

Independent contractors have to pay the full 15.3% Social Security and Medicare taxes that are taken out of a regular W2 paycheck.

W2 employees have 7.65% of their net pay withdrawn to cover this tax, while their employer pays the other half. 1099 employees don’t have that luxury, so you have to set aside 15.3% at a minimum for taxes.

Now, as a 1099 contractor, you can’t write off the full 15.3%. That’d be like giving a W2 employee the opportunity to write off the share of Social Security taxes withdrawn from their checks each month.

Instead, you can write off the 7.65% that would’ve been paid by an employer if you weren’t self-employed. This is one of the biggest places any contractor can save money, and it’s one of the most under-utilized deductions available.

It makes sense that this is used less than other deductions, as the ability to deduct regular taxes doesn’t strike many people as a viable deduction.

If you want help with your small business taxes, or have more questions that weren’t answered in this email, please don’t hesitate to reach out to UltimateTax for more information.

Get The Most Of Your Money

At the end of the day, the perks of being self-employed almost always outweigh the taxes, long nights, and stress of finding new business. Not everyone gets to write off meals or the new home office they furnished, but you do.

All of these deductions – and many more – are completely legitimate. They’re here to be taken advantage of, and we’re here to help you get back the most of the money you work hard to earn.