1. Car expenses and mileage
Of all deductions available to contractors, distance, and car expenses can provide one of the most sizable write-offs. You’re able to write off any driving while working, driving between gigs, going to meet clients, or driving out of town for business. In 2016, the standard mileage rate allowed you to write 54 cents from every mile you drive for your business.
There are two methods for tracking and deducting mileage: the actual practice and the standard mileage rate. The standard mileage rate considers gas, insurance, maintenance, and depreciation, and it is much easier to keep track of and claim. To deduct it, keep track of your business miles and multiply the total mileage amount by .54 (the 2016 standard mileage rate). If you use this deduction, you can’t additionally write off insurance or gas because it was already included in the rate.
Make sure you are keeping adequate records of your mileage because this is also one of the most often audited expenses for contractors. The IRS recommends spending a few minutes a day (or whenever you drive for business) recording your mileage in a driving log. You will need to log the date, miles, business purpose, plus the starting and ending odometer amount.
2. Home office expenses
If running your Idaho independent business from home, you can potentially count a portion of your home expenses a tax writes off. There are two essential conditions to use this deduction:
- Primary place of business: Your home must be where you conduct most of your independent business. If you only sometimes work at home out of convenience, then you can’t count it as a deduction.
- Exclusively used for work: The space that you use within your home must be solely meant for work. For example, a room that is only your home office or a desk in one place that is reserved only for running your Idaho independent business. Ultimately you will write off only a percentage of your home space.
Like deducting mileage, there are two options for deducting home office expenses: the Simplified Method or the Regular Method.
- Simplified Method: You can multiply the square footage of your office by the IRS set rate of $5 per square foot for 2016, up to 300 square feet per year.
Regular Method: Track all costs related to your Idaho home residence and determine the portion to allocate to your home office using Form 8829.
If you must travel for your Idaho business, make sure to keep track of your airfare, cab, Uber/Lyft, hotel, rental cars, and any other expenses. Those costs are deductible if your travel is for a business purpose. For example, do you have to travel to pitch or present to a client? Count that trip and any associated costs as a tax deduction.
4. Health insurance premiums
If you pay for your Idaho health insurance plan and your spouse doesn’t benefit from an employer-subsidized Idaho health insurance plan, then you could count those payments as a tax write off on your individual income taxes. If your Idaho independent business earned a profit for the year, you could report this on your 1040 form, not your Schedule C (where you’ll report most deductions).
5. Continuing education in Idaho
Contemplating taking a class or online course to improve your skills? If any education is needed to “maintain or improve skills required in your present work,” then you can count it as a tax write off. An important caveat is that you can’t write off education expenses for learning a new line of work, only for improving and honing your current skill set.
The IRS Publication 970 provides additional information about this deduction in Chapter 12.
6. Cell phone
Do you use your cell phone for your Idaho contracting business, as well as your personal use? If so, then you can count a portion of your cell phone bill as a tax write off! You’ll have to make a close estimate as to what percent of your usage is personal versus business. However, for the amount that is Idaho business, apply that percentage to your phone bill and deduct it.
Any supplies that you purchase to conduct your independent business are deductible. If you’re a cleaner, you can deduct cleaning supplies. Other examples are office supplies, food for passengers in your car, new messenger bags for couriers — if it is used for you to get the job done, then it’s deductible. If you rented or leased any equipment for your business, that’s a write off as well.
This is another expense that can add up for certain types of contract work. If you regularly pay for parking, keep those receipts as well. These too can count as a tax write off.
9. Fees, Dues, Subscriptions
If you pay for any services, trade organizations, or publications required for your Idaho business, then those are tax-deductible. For example, if you have a certification that requires a fee to maintain, then you can count that as a write-off.
There are many more 1099 Idaho deductions that you can count, so make sure to double-check with a tax advisor to best understand the full extent of what you can write off based on your particular work. The IRS Schedule C instructions also provide an excellent resource for a better understanding of how to claim those deductions when doing your taxes. By far, the most critical takeaway is to keep incredibly diligent records of your expenses that you plan on deducting.
Postage is one deduction that is often overlooked. However, if you find yourself shipping and mailing for business often, keep track of these expenses.