Tax Write-Offs Explained | Tax Deductions for the Self-Employed

if you have any 1099 income then tax write-offs are your best friend they may sound complex and intimidating but i am here to break it down for you [Music] what is up everybody my name is tara and welcome to keeper tax your one stop shop for all things 1099 taxes here on this channel we create resources for freelancers independent contractors gig workers and anyone else who files or should be filing business taxes welcome back to 1099 tax university where i give you the tax content you need to set yourself up for success as a gig worker in today's video we will be taking a deep dive into how 1099 tax write-offs actually work when i first began filing self-employed taxes i had absolutely no clue what i was doing and i needed a resource just like this so i could file my taxes confidently so if you are ready to file your taxes confidently write down in the comments i am locked and loaded and let's jump into the video david a write-off is a business expense used to reduce your taxable income okay well then why isn't it called a tax write-off it is now as you can see by that video clip tax write-offs can be hard to understand but today we are going to simplify it a little bit for you [Music] a tax deduction also known as a tax write-off is a work-related purchase that you can claim to get a bigger tax refund meaning giving the government less of the money that you earned let's do a simple math equation to put it into perspective for you so if you made ten thousand dollars in your business as a freelancer or gig worker and you had tax write-offs totaling two thousand dollars now this could include things like car expenses equipment or even wi-fi so if those deductions total two thousand dollars that amount will be deducted from your total income of ten thousand dollars leaving eight thousand dollars this eight thousand dollars is what the irs will use as your total taxable income even though you made a total of ten thousand dollars for the tax year so another way to think about it is a 15 to 40 percent discount depending on what your income tax bracket is on whatever you bought for your business or needed to purchase to perform your job effectively and efficiently with a w-2 job we cannot write off any expenses to lower our taxable income but as freelancers we try to reduce our income from freelancing with as many expense deductions as possible and that's why it is so important to use a 1099 tracker to record all of your bills but we'll touch on that in another episode of tax university but for now i have linked the 1099 tracker down in the description box below so make sure you check that out [Music] that you know what a 1099 tax deduction is i'm going to give you a few examples of items you can write off to start getting those juices flowing number one your phone bill it is so hard to think of a job that doesn't require the use of a phone and since you need cell phone service to do your work it is a partial write-off unless you have a business line that is solely used for work purposes not mindlessly scrolling on instagram or ordering a new two-piece set for your dog on etsy that does not count so let's say you only have one phone and you use it for business and personal use first you have to determine the percentage of time that is dedicated to business use and the percentage of time dedicated to personal use so we'll just go with 50 business use now let's say your phone bill is 60 a month if you claim it as a 50 write-off on your taxes then you can save 108 on taxes and here is how i got that number so if your phone bill is sixty dollars and you multiply by fifty percent that is thirty dollars now let's say you're in the thirty percent tax bracket that'll save you nine dollars a month and when you multiply that by twelve we get 108 for the year in savings on our cell phone bill now are y'all picking up what i'm putting down in addition to your phone bill you can also write off software like adobe photoshop if you're a freelance designer project management software like trello our monday and even bookkeeping services number three car expenses and mileage you can also write up car expenses or mileage and i will deep dive into this in another video but essentially we recommend using the actual expense method when dealing with your car because tracking mileage can be a hassle and you can only deduct one or the other number four equipment and supplies if there are any items that you need to get your job done effectively and efficiently you can write off those items on your taxes for example if you are a grocery delivery driver you need to carry tons of groceries to your customers doors you may invest in a push card or a wagon to be more efficient on your job that is a tax write-off let's say that you're a rise share driver and you need a phone mount to hold your phone so you can see the map efficiently you can also write that off on your taxes and a couple of other things i want to share with you that you can write off are things like transportation meaning public transportation or even ride share meals rents utilities and wi-fi and even educational expenses so fun fact i used to be a pastry chef and in order to work as a freelance chef i had to be surfsafe certified oh that's a tough twister meaning i had to pay for and take a class and then take a test for the certification so this is an example of an educational expense that you can write off on your taxes if you guys would like me to dive deeper into specific write-off examples please let me know down in the comments but for now i want to make sure that i mention a couple of things that are not eligible to be written off [Music] so we've been talking a lot about things that are deductible but you also have to be careful some things may seem like they are right up but they are not for example clothing so to qualify as a possible write-off the clothing has to meet two basic requirements you have to wear it for work and you would only wear for work for example scrubs for doctors and nurses so these clothing items are specifically for a job and you don't see marianne strutting down rodeo drive with her fresh pressed scrubs on for sunday brunch so that would be a write-up but other uniforms like a plain black shirt and khaki pants may not qualify for a write-off because you can honestly wear them on any given day in any occasion the next thing that may seem like a write-off but isn't is lunch on your own so lunch on your own is not deductible in order for a meal to be deductible you have to be traveling or they have to have some sort of business connection like a business lunch and third health and beauty products are not write-offs we can't write them off y'all everyone with 10.99 income no matter how much it is should be claiming tax write-offs it is the key to having a reasonable tax bill with that being said in the comments below please let me know if you have any questions about anything that i mentioned in this video and if you would like more easy to digest tax content make sure you give this video a like and if you're not already make sure you hit that big red subscribe button down below and make sure your notifications are on so you can get all of the alerts so you can stay up to date on all things self-employed taxes thank you guys so much for watching and i really hope you learned something and i will see you in the next one [Music] you

Channel: Keeper - taxes made magical

Views: 9,049

Keywords: tax write offs, write offs, what are tax write offs, how tax write offs work, business tax write offs, business tax deductions, small business tax write offs, tax write offs explained, tax write offs for self employed, tax write offs for small business, what is a tax write off, what can i write off, tax write offs for independent contractors, tax deductions, tax deduction, tax deductions explained, tax deductions for self employed, gig worker taxes, keeper tax

Id: 2-D7BiB5Tw8

Length: 8min 5sec (485 seconds)

Published: Thu Sep 23 2021