Ah, tax season. One of the most delightful times of the year. Or…something like that. If you are a self-employed contractor, it’s likely you pay taxes quarterly. However, some of you may just wait till the end of the year and deal with it all at once. Whatever your approach, it’s still important to conjure up many tips for getting your best refund as a self-employed contractor.
So, without further ado, here are some of my tips for getting your best refund ever as a self-employed contractor.
Tax Tips for Getting Your Best Refund as a Self-Employed Contractor
This post was written by our amazing staff writer, Kerah Kemmerer.
1) Let’s Start With the Basics – Organization
One of the simplest ways to stay organized throughout the year is to use software programs like Quickbooks Self Employed or Freshbooks so your expenses are already documented and categorized as you go. This will save you significant time as you work through gathering paperwork to submit or as you file your own taxes.
In addition to those programs, be sure to take photos or use an additional app to scan in your receipts. Keeping diligent track of receipts is crucial in case you ever need to show proof of your purchase to the IRS.
The sooner you find a system that works for you to track and keep records, the better off you will be as your business grows and potentially becomes more complex.
2) Client Gifts
It all starts with the clients, because without them you probably wouldn’t be in business!
Client “thank you” gifts can be a fun and thoughtful way to build your personal brand and let your clients know you appreciate them. Gift cards and useful little items that your clients will enjoy can make you stand out amongst the competition.
Be sure to abide by the IRS rules regarding client gift deduction limitations though. $25 per client is not much to work with so you’ll want to get creative.
(Also, not a tax tip, but if you really want to thank a fantastic client, you probably shouldn’t worry about whether you can write the whole thing off. It’s ok to go above and beyond sometimes to show your appreciation.)
3) Client Meetings
Speaking of clients, another great write-off is for client meetings.
I like to take my clients out to coffee and dessert and get to know them before having them sign any kind of photography contract. It’s a great way to find out if you will all work well together and get those expectations out on the table right from the start.
Don’t be too excessive in this area, though, as the IRS does limit client meal deductions to 50% and has a few other stipulations. You can learn more about this deduction here.
This dedication is pretty significant for most self-employed individuals and is one of the best tax tips for getting your best refund. Unless you decide to make deductions for total vehicle depreciation, mileage is a pretty common way to claim this tax deduction.
One way to be sure you claiming every mile you deserve is to download an app to help track it for you.
Some of the best options are:
Of course, you can always go the old-school route of keeping a milage tracker book in your glove box (you can deduct the cost of one, too!). However, if you are prone to forgetting to fill it out everyday, this tax tip for using an app may be best for you.
5) Rental Gear
Not every contractor will need to take this cost into consideration, however, some may find themselves needing to rent…
- vehicles, or
- other items they haven’t been able to afford to invest in yet.
Keeping detailed receipts is very important when claiming this deduction.
If, however, you are the one providing the rental gear, keeping records is a little more involved. Rental inventory is considered a fixed asset and takes depreciation into consideration. Learn more about this here.
My tax tip here is to factor in the cost of renting verses simply purchasing the item you need on a payment plan. You may come out ahead by just diving into the purchase and depreciating the cost of the item over several years. Be sure to take interest rates into consideration, and don’t get in over your head!
6) Software Programs (Including Tax Filing Services)
As a freelancer or small business owner, software programs are what make our world go round. While there are some free options available for managing financial records and invoicing – think…
- Google Drive,
- Excel Spreadsheets, and
- a few free apps…
…some of us may need more robust systems.
- Adobe Design programs,
- video editing software,
- online gallery platforms,
- or advanced analytics systems,
…all of these items are tax deductible as an office expense (more below). Considering that the cost of these programs can really add up, these should provide you with a decent deduction in this category.
Tax tip for getting your best refund – Don’t forget to deduct the cost of any tax-filing software programs as well! (Or, if you file in person, the cost of working with your accountant.)
As a freelancer, it’s important to always be growing your skills. And what better way than signing up for educational courses? According to the IRS, education is deductible as long as it meets two criteria:
- Education “that maintains or improves your job skills”, or
- “A law requires to keep your status or occupation”
One stipulation, however, is that even if it meets the aforementioned criteria, it “can’t be part of a program that will qualify you for a new trade or business or that you need to meet the minimal educational requirements of your trade or business.”
With this in mind, it may be possible to deduct courses you took online with:
- and Lynda.com
Or even an in-person class you enrolled in to brush up on some skills and keep up with the competition. If you aren’t sure if your particular course or program qualifies, check out this short questionnaire provide by the IRS.
It’s a great thing to remain skillful in your field. It’s even more awesome if you can use these “tips to getting your best refund” to save money on the deal!
The home office deduction for a self-employed contractor can be a little bit tricky and it’s important to make sure you follow the exact criteria.
A home office is defined as a designated space used exclusively for conducting business.
There are two ways this can be deducted:
- The simplified option
- Actual expense deduction
The first option is based on multiplying the square footage of the space by a designated rate. The rate for 2018 was $5 per square foot up to 300 square feet.
The second option “values your home office by measuring actual expenditures against your overall residence expenses.
Want to know more about these particular tips to getting your best refund? Check out the home office deduction here at NerdWallet.
9) Office Supplies
This deduction is pretty straightforward and not too complicated.
If you keep your receipts you should have no issue writing off the following items:
- Electronic equipment,
- printer ink,
- paper clips,
- paper and staples,
- furniture, such as a desk or chair used only for business.
The IRS allows a 100 percent deduction of office supplies as long as you keep a receipt.
Looking for cheap supplies? Check out this list of ten best websites for purchasing office supplies!
10) Office Expenses
This category focuses on operating expenses….one of the more forgotten tips for getting your best refund.
Items that can be deducted here include:
- Computer software (see above for what this includes),
- Internet, and
- any office equipment costs.
11) Retirement Plan Contributions
Finally, do not forget about retirement plan contributions! You do have a retirement plan, don’t you?
- IRA, or
- a Health Savings account?
You can learn even more about seven retirement plan options here. Once you get set up, you’ll have another tax deduction to add to the books as a self-employed contractor.
One of the best tax tips for getting the best refund…Retirement contributions. Start now – seriously! The longer you put this off, the more you are hurting your retirement savings and missing out on significant tax savings.
BONUS: A Few More Tax Tips for Getting Your Best Refund
While this article focuses more on the nuts and bolts of how to deduct as many expenses as possible as a self-employed contractor, the key idea is to STAY ORGANIZED and pay attention to all the little costs throughout the year.
- I highly recommend that all freelancer contractors create a separate savings account and pull in estimated taxes after every payment received. Tax brackets will affect the exact percentage needed, but a good rule of thumb is to put aside 30% of every dollar you earn to be prepared.
- For those who are married and filing jointly, you also have the option of having your spouse’s W4 set up to withhold at the higher single rate. This will help offset some of the self-employment taxes and may help you end up with a refund at the end of the year instead of a tax bill.
To each their own though. Not everyone loves the idea of good ole’ Uncle Sam getting to borrow their money interest-free. I’m not a fan either, but since my income varies from year to year, I like to play it safe and pay more throughout the year rather than be surprised by a big tax bill come April.
Did I Miss Anything Big?
I don’t pretend to be a tax expert and I am sure there are a few more deductions I didn’t cover. However, one thing I’ve learned over the years is how many deductions I was missing out on by not simply diving in and learning more for myself. I hope you’ve been able to learn something new here, and that you will have your best tax season yet!
Are you a self-employed contractor? What are your best tips for getting your best refund?
AUTHOR Kerah Kemmerer
Hello! I'm Kerah. I'm a writer and personal finance enthusiast with a background in marketing. I'm also a wedding and portrait photographer, part-time RVer and a lover of simple and minimal living. Always up to some project or adventure over @krisandkerah on Instagram.