Tax Deductions That Can Be Taken

Deductions For Self-Employed and Independent Contractors

Let us take a look at some of the tax deductions that can be taken if you are self-employed or an independent contractor.

Business Expenses: In order to be tax deductible they must be both ordinary and necessary. If an expense is partly business and partly personal, separate the business part. The business expenses are reported on Schedule C.

Bad Debts: A business bad debt is one that comes from operating a trade or business but the debt is not collectible. Report this on Schedule C, Line 27. For all other non-business bad debts, they are deductible as short term losses on Schedule D.

Car Expenses: The cost of maintaining and operating a vehicle for business purposes are tax deductible. You can either use standard mileage or actual expenses, whichever gives you the best benefit. This includes going from one workplace to another in the course of business, visiting clients, and going to a business meeting away from your regular workplace. Keep a daily log of all miles driven and business miles driven, and keep receipts for gas, tolls, oil changes and the like.

Depreciation: You may acquire property for your business that you expect to use more than a year. Instead of deducting the entire cost as a business expense, spread the cost over more than one tax year and deduct part of the cost each year. I will go more into depreciation in the future.

Gift Expenses: You can deduct no more than $25 for business gifts given directly or indirectly to any one person during the course of the tax year.

Insurance: You can deduct fire, theft, storm, accident or similar insurance, credit insurance on losses from unpaid business debts, and medical insurance for employees. There are many other types of insurance you can deduct. I will cover those in the future.

This is only the tip of the iceberg on what can be deducted. Stay tuned for more on deductions.

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Tim Watson is a tax preparer during the season who also runs an SEO directory and an iPod directory. You may use this article as is provided the resource box stays intact.