Maximizing Tax Breaks for Freelancers in 2023: Essential Deductions You Don't Want to Miss

Home Office Deduction

If your home is your office, you can deduct a portion of your mortgage or rent. You can also deduct related expenses such as property taxes, utilities, repairs, and maintenance. To do this, you need to calculate the percentage of your home's square footage used exclusively and regularly for work. You can find several scenarios for this in the IRS Publication 587. Alternatively, you can opt for the simplified option and deduct $5 per square foot of your home used for business, up to 300 square feet.

Professional Development

You can take advantage of tax deductions for "qualifying work-related education." This includes tuition, books, supplies, lab fees, and transportation to and from classes. As long as the education "maintains or improves skills needed in your present work," you can claim it. You can find more information about the requirements in IRS Publication 970.

Mileage Deduction

If you use your vehicle for work, you can deduct a little over $1 for every two miles driven for business-related purposes. You can multiply the number of miles by the IRS's standard mileage rate. In 2022, the rate was 58.5 cents per mile for the first half of the year and 62.5 cents per mile for the rest of the year. Make sure to keep a record of your mileage as proof.

Business Travel Costs 

You can deduct all expenses related to business travel, including plane tickets, hotel rooms, car fares, and meals. For 2022, you could even deduct the full cost of meals. Keep a record of your expenses to prove they were necessary and exclusive to your work.

Office Supplies

Office supplies such as computers, software, and newspaper subscriptions can also be deducted if they are legitimate and exclusive to your work.

Phone and Internet

 If you have a dedicated work phone or internet connection, you can deduct the bills. If you don't have a dedicated line, you can still deduct the percentage used for business.

Advertising Expenses

You can deduct advertising expenses to keep your name before the public if it relates to business you reasonably expect to gain in the future. Just make sure you aren't trying to deduct anything politically affiliated.

Credit Card and Loan Interest

If you don't have a business credit card, you can still deduct interest charges that accrued on business expenses on your personal credit card statements.

Health Insurance Premiums

Self-employed individuals may qualify for a tax deduction on their health insurance premiums. However, the details can be tricky. For example, if you're eligible to enroll in your spouse's employer's plan and chose not to, you can't take this deduction. You can find more information in IRS Publication 535.

Self-Employment Tax Deductions

You can deduct half of your self-employment tax on your income taxes. This is not the same as income tax, and if you owe $1,000 in self-employment tax for the year, you can pay that full amount when it's due. But when you file your Form 1040, you can deduct $500 as part of the self-employment tax deduction.

Managing taxes can be complicated, but by taking advantage of these tax deductions, you can save money and keep your finances in order. If you're unsure about filing your self-employment taxes, it's worth considering the services of a professional tax consultant.