Expenses and deductions The added taxes may feel burdensome, but self-employment income opens the doors to a host of new deductions, as long as expenses are germane to the business.
“If you are doing things like Uber or a rides program, you can take your gas, your carwash, your vehicle licenses,” Ms. Pickering said. “That may not be obvious for someone getting into this for the first time.”
But there are also several broad categories of expenses that can apply to different businesses. People working out of their homes, for instance, can take the home office deduction, as long as the space is used “regularly and exclusively” for business purposes. If that’s the case, you can deduct $5 a square foot of dedicated office space, up to a maximum of $1,500. Alternatively, a more complicated calculation, based on actual expenses, could yield a greater home office deduction.
Phone lines and computers may also be deductible, separate from the home office expense, but if the time is split between personal and business use, that needs to be documented. “The I.R.S. won’t take your guess,” said Mark Luscombe, principal tax analyst at Wolters Kluwer. “These things should be contemporaneous. They don’t look kindly on you if you create records at the time of the audit.”
Transportation expenses — say, to meet customers — may also be deductible and can be accounted for in a couple of ways: When driving, you can either take the standard mileage deduction or actual expenses to operate the vehicle (lease payments, insurance, gas, oil) based on the ratio of business to personal use. Track both, then take the larger deduction.
Individuals who use their vehicles more than half the time for business may be eligible to deduct up to $25,000 of the cost, as long the vehicle meets certain specifications. “That is a great one for Uber and Lyft drivers, but it also goes for anyone with their own business,” said Lisa Greene-Lewis, a certified public accountant at TurboTax.
Read the full story at Tax Tips for Those Who Make Money in the Gig Economy