As an independent contractor, you’re focused on making money. However, because you’re classified as a self-employed person by the IRS, you also have a higher tax liability. That’s where tax deductions come in.
Tax deductions lower your taxable income, which translates into keeping more of your earnings at tax time. That’s why it’s crucial to know which business expenses can be deducted.
That’s why we created this guide to help you write off expenses related to coronavirus, which you may have not known are eligible for deduction.
Note: Unless your small business happens to be an accounting firm, it’s always beneficial to consult a tax pro who can help you accurately prepare your filing and maximize your tax deductions.
Deduction best practices
Before we dive into the deductions, it’s important to note that to deduct a business expense, you must follow best practices. Theses include:
- Keep detailed records. If you deduct a business expense, it’s important to have a record of it—using Everlance to automatically log expenses makes that easy.
- If you have an expense that is both personal and business-related, then you’ll need to estimate how much of it was personal vs. business and only deduct the business portion.
COVID-19-related tax deductions:
If you have been keeping your car extra clean to keep your passengers safe from COVID in 2021, then it’s tax-deductible. Possible write-offs include:
- Lysol wipes
- Sanitizing spray
- All-purpose cleaner
- Hand sanitizer
If you have been keeping you and your passengers safe by using masks, test kits, etc., then it’s tax-deductible. Possible write-offs include:
- Test kits
Government COVID relief programs
There are several COVID-related tax deductions and credits available to self-employed people. We recommend consulting with a tax pro to see if there are any of these programs that you’re eligible to claim.
Remember that the best way to prepare for 2021 taxes is to keep track of all your taxable expenses with records of everyone. (Everlance makes that automatic and effortless! Taxes are never pleasant, but Everlance can certainly make it less tedious.)
We hope this guide will help you maximize your tax deductions this year and keep more of your hard-earned income.