Top 10 IRS DeductionsWrite Offs for your Side Hustle

Navigating the labyrinth of tax deductions can feel like embarking on an odyssey, especially when it comes to leveraging every possible benefit for your side hustle. With your entire list of expenses, deciphering which ones qualify for IRS deductions can be a daunting task. So, we’ve created a Top 10 IRS Deductions and write-offs list tailored specifically for your side hustle endeavors. From home office expenses to real estate investing benefits, we’ll explore ways to potentially maximize your tax savings while staying firmly within the bounds of the IRS. So, grab your receipts and your Quickbooks login and let’s embark on this journey to optimize your side hustle’s financial landscape.

 

Side Hustle Deduction I: Home Office Deductions

Whether you are a homeowner or a renter, you are eligible to claim the deduction for any type of home (ex. a single-family home, an apartment, a condo or even a houseboat). It is not applicable for a hotel or other short-term lodging purposes. Read more HERE.

Side Hustle Deduction II: Cell Phones

If you are self-employed and use your cellphone for business purposes, you are eligible for a tax deduction for that usage. You cannot deduct personal use of the phone. Read more HERE.

Side Hustle Deduction III: Auto

If you only use your car for work, you can deduct the full cost of owning and running it (with some limits). You can only claim the cost of the business use of the car, though, if you use it for both work and pleasure. (if use 50% or more for business – take actual) otherwise take mileage.

The standard mileage rate method or the real expense (actual) method are the two main approaches to deducting your car expenses. You might want to figure out your deduction both ways before choosing one to see which one gets you a bigger deduction if you are eligible for both. Read more HERE.

Side Hustle Deduction IV: Dining

You can write off 50% of the cost of the meal, including taxes and tips, on your taxes as long as it was a business meal. Business owners may be able to deduct the costs of meals and beverages provided during an entertainment event Read more HERE.

Side Hustle Deduction V: Travel

When an employee has to travel for work reasons away from their tax home or main place of work, they can deduct the cost of their trip. A taxpayer is traveling away from home if:

  • They are away for longer than an ordinary day’s work, and…
  • They need to sleep to meet the demands of their work while away.

Read more HERE.

Top 10 IRS DeductionsWrite Offs for your Side Hustle

Side Hustle Deduction VI: Equipment/Tools/Supplies

You can depreciate most types of tangible property (except land), such as buildings, machinery, vehicles, furniture, and equipment. You can also depreciate certain intangible property, such as patents, copyrights, and computer software.

To be depreciable, the property must meet all the following requirements:.

  • It must be property you own.
  • It must be used in your business or income-producing activity.
  • It must have a determinable useful life.
  • It must be expected to last more than 1 year.

Read more HERE.

Side Hustle Deduction VII: Family Members – Pay Kids, Under 18, No W2

One of the advantages of operating your own business is hiring family members. However, employment tax requirements for family employees may vary from those that apply to other employees and your entity structure. Payments for the services of a child under age 18 are not subject to social security and Medicare taxes.  If the child is 18 years or older, then payments for the services of a child are subject to social security and Medicare taxes. Read more HERE.

Side Hustle Deduction VIII: Medical

A Health Savings Account (HSA) is a tax-advantaged way to save money. HSA contributions reduce taxable income, investment growth in the account is tax-free, and qualified withdrawals are tax-free. Money left over at the end of the year in an HSA is not forfeited and can be rolled over from year to year.  You must have a high deductible health plan (HDHP) to open an HSA.

All employer contributions to Health Reimbursement Accounts (HRAs) that meet with IRS rules are 100% tax deductible to the employer and tax-free to the employee.

Read more HERE.

Side Hustle Deduction IX: Professional Fees or Educational Expenses

You can write off the expense of certain work-related education as business costs. This is education that meets at least one of the following two tests: To be deductible, your expenses must be for education that (1) maintains or improves skills needed in your present work or (2) your employer or the law requires to keep your present salary, status or job.. Read more HERE.

Side Hustle Deduction X: Real Estate

If you receive rental income from the rental property, there are certain rental expenses you may deduct on your tax return. These expenses may include mortgage interest, property tax, operating expenses, depreciation, and repairs.

You can deduct the ordinary and necessary expenses for managing, conserving, and maintaining your rental property. Ordinary expenses are those that are common and generally accepted in the business. Necessary expenses are those that are deemed appropriate, such as interest, taxes, advertising, maintenance, utilities, and insurance. Read more HERE.


 

 

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