Your Business/Side Hustle Tax Deduction Checklist

Almost 50% of people under the age of 45 have a side hustle.

And here's some shocking news for some of you...

That means you are a "business owner".

But the problem is a lot of people don't think of themselves that way and forget to write off expenses on their taxes.

Now, don't be like that Seinfeld clip and just think because you "write something off" means you don't have to pay for it.

But it will lessen your tax burden. So make sure you go down this list and add it up to save yourself some money from Uncle Sam!

Advertising, marketing, and promotion costs

Costs associated with marketing, advertising, and otherwise promoting your business are all tax-deductible. This includes the following expenses:

  • Website hosting and domain
  • Website design, themes, plugins, stock photos, fonts, and other related costs
  • Online ad spend
  • Advertising costs in newspapers, magazines, and on websites
  • Sponsored post costs
  • Influencer costs
  • Graphic design software subscription costs
  • Marketing software

Auto-related expenses

  • Buying a company car
  • Vehicle expenses, including gas and repairs
  • Mileage deductions

Bank, commissions, professional, and other fees

  • Bank fees, such as service fees, ATM fees, overdraft fees, deposit fees, credit card annual fees, card late payment fees, and wire transfer fees.
  • E-commerce fees paid to online sellers such as Amazon, Etsy, eBay, and other marketplaces
  • Merchant processing fees from using platforms like Stripe, PayPal, Authorize.net, and others
  • Professional consultation fees, including working with lawyers, accountants, and business consultants, can all be deducted.

Bad debt

Unfortunately in the business world, sometimes clients don’t pay invoices or pay back their loans. This creates "bad debt". 

But there is a small upside to those disasters. If these debts can be directly tied to a business expense, these expenses can be used as deductions.

Charity

Contributions to a 501(c)(3) non-profit can be used as a tax deduction.

Just be sure to get a donation receipt from said organization.

Continuing education

  • Books, industry-specific magazine subscriptions, reference materials, audiobooks, and other business-related media
  • Online courses, mastermind groups, coaching, conferences, lectures, and other similar events can be covered. This includes courses taken for continuing education requirements mandated to maintain licenses and certifications.

Cost of goods sold (COGS)

You can deduct certain expenses that go into manufacturing or selling products.

This includes the cost of raw materials, labor, and inventory.

Employee deductions

  • Payroll software or service provider fees
  • Local, state, and federal payroll taxes
  • Wages, salaries, employee commissions
  • Employee benefits, including 401ks, childcare, disability insurance, and bonuses
  • Payments made to subcontractors or independent contractors
  • Meals for employee meetings or work shifts, 50% deductible

Depreciation costs

It’s possible to deduct depreciation as well, and this applies to furniture, equipment, and any other business asset that loses its value over time.

What and how you can depreciate changes every year so be sure to check with a tax professional about this.

Some of the methods include:

  1. Section 179 allows business owners to deduct up to $1,080,000 of new or used property placed in service during the tax year to be deducted.
  2. The de minimis safe harbor lets business owners deduct assets with a fair market value less than $2,500.
  3. Bonus depreciation ensures that businesses can deduct 100% of the costs for equipment to be expensed in the first year.

Health and business insurance

  • Auto insurance for business vehicles
  • Business, professional, and liability insurance
  • Worker's comp
  • Malpractice insurance
  • Property insurance
  • General liability insurance
  • Business owners and self-employed individuals can deduct 100% of their health insurance premiums

Licenses, permits, certifications, and legal documents

  • Purchasing contract, proposal, and other legal template documents
  • Costs related to getting licenses, permits, and certificates relevant to your business

Loans

  • Interest payments made on business credit cards and loans

Office expenses

  • Rent, leasing, or co-working space subscriptions
  • Part of your mortgage (if you work from home)
  • Office repairs
  • Gifts to clients
  • Miscellaneous office supplies and software as long as they are day-to-day costs

Taxes

Taxes count towards your deductions, including:

  • Federal tax
  • State tax
  • Local tax
  • Sales tax
  • FICA
  • FUTA
  • State unemployment taxes
  • Self-employment taxes

Travel

  • Airfare, ground transportation, public transportation
  • Lodging, such as hotels or Airbnb
  • Meals, 50% deductible

Utilities

  • Internet costs
  • Gas, water, electric
  • Web conferencing software like Zoom and phone number costs

I'm Not A Businessman, I'm A Business, Man.

Whether you are doing your side hustle in hopes of making it a full-time venture or just want to make some extra cash every month, its important you treat it like a real business.

Don't skip out on all the legal ways you can save money and build your business.

 

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