For example, if you fly from California to Paris for a three-day photography conference, you may want to extend your trip for two days of touring. Do you have a cell phone or an internet connection that you use for both personal use and business? If so, you can write off a portion of your monthly internet and cell phone bill. Similar to your home office, you'll want to determine what percentage of your phone and online usage is business vs.
You can then deduct that percentage of your bills at tax time. You can deduct medical, dental and vision premiums. In addition to health insurance premiums, you can write off expenses such as glasses, nonprescription medications, and visits to the chiropractor.
There may be benefits for your spouse, as well. Business insurance provides important coverage that can protect you from unexpected expenses related to accidents or business mistakes.
For example, a professional liability policy can cover expenses if a client accuses you of missing a deadline or making a mistake that costs them money. In some cases, a client or commercial landlord might ask you for a certificate of insurance before they sign a contract with you.
If you contribute to an individual retirement account IRA , you may be able to make a tax deduction on those contributions. There are some caveats though. First, you may need to reduce or eliminate the deduction if you or your spouse contributes to an employee-sponsored retirement plan such as a k or b. If you got a loan from a bank to fund your business, you may deduct the interest as a business expense.
If your loan was used for both business and personal expenses, you need to track how much of it went to your business and only deduct the interest from that portion. You can also deduct business-related banking fees and charges. For example, paying for replacement checks, monthly service charges, and lost card fees.
These charges add up as many traditional banking institutions often nickel and dime you. Similarly, you may write-off the interest from a business credit card, and any associated costs like annual fees. If you have a personal card used exclusively for business expenses, you can still deduct. These related expenses include registering for a website domain, travel for scouting business locations, market research, and training staff.
You can deduct them in a few years as they depreciate in value. Spending money to advertise your business can mean more write-offs. Expenses include both digital and physical advertising costs. The second category includes all other types of interest. Examples are business credit cards, lines of credit, or interest on equipment loans. You can deduct any fees paid to licensed professionals such as attorneys, accountants and online bookkeeping services like Bench. This includes fees paid for tax advice, which means preparation of Schedule C is a deductible expense how meta.
If the professional service involved both personal and business matters, only the part of the expense related to your business is deductible. If you use a dedicated office for your business, expenses related to that office are deductible.
The most common expenses are maintenance, cleaning and repairs. Further reading: Home Office Deductions. If you rent office space, cars, or any physical equipment for your business, all those expenses are deductible. This category includes incidental repairs and maintenance made to machines and other property. For example, you can deduct costs for re-carpeting your office or fixing your broken photocopier. If you have employees and offer an employer-sponsored retirement plan, such as a SIMPLE-IRA or k , you can deduct the cost of establishing and maintaining the plan, as well as any matching contributions.
These get deducted on Form For consumable materials and supplies, such as those that go into producing inventory, you can only deduct the amount you actually used in that tax year, not the total amount you purchased.
This category can also include materials used to improve delivery of services, such as professional instruments, books and equipment, but only if they will be useful for a single year.
You can deduct any business licenses, certifications and regulatory fees related directly to your business. This can include incorporation fees and small business licenses for your state. Travel expenses for your spouse and children are not deductible unless they are traveling with you for a legitimate business purpose.
Further reading: How to Deduct Meals and Entertainment in If you pay for a workspace — whether you own or rent the space, the cost can be deducted from your Like all expenses, you are always at risk of an IRS audit, so make sure to keep good records and save receipts.
One trick for home office deductions is to keep a blueprint diagram of your home office space — with accurate measurements and notes from any work or repairs incurred. Similar to calculating vehicle expenses, there are two options for calculating your home office write-off amount.
With the standard calculating method, you must use detailed notes about your expenses to show each itemized cost. The simplified option is calculated by the square footage of your home office, up to square feet, allowing you to write off 5 dollars per square foot. If you incur more costs than that for your home office in any given year, you will want to keep detailed records of your costs and use the standard calculating method. If you are self-employed and use your phone, computer, or tablet for work, you can deduct the cost on your However, if you share plans for personal use, you should only deduct the amount that accounts for your business use.
Suppose you are self-employed and pay for your health insurance. As a self-employed worker, you can also deduct health insurance costs incurred to pay for coverage for dependents — like a spouse or any children under 27 — even if they are not listed as dependents on your taxes. When you are traveling for business — whether you are going to a meeting, at a professional organization conference, or entertaining a client, for example, there are several expenses that you can write off on your To be considered business travel, you should show records of the specific business purpose and business activity, so make sure to keep detailed records of all the expenses and the business activity logs.
Travel expenses that can be written off include flights, gas, lodging, and meal expenses during the trip. The new Consolidated Appropriations Act of HR grants a temporary allowance for full deductions for all business meals.
If you are self-employed and have business loans, the interest paid can be deducted from your Again, it simplifies record-keeping if you keep your accounts separate for personal and business uses. However, if a portion of the loan is for your business, you can write off that portion of the interest. If you use a business line of credit or another business credit card, the interest paid on business expenses can also be deducted. If you use a personal credit card for a business expense, you can still deduct the interest paid for that purchase, but you should have a receipt or record of the cost.
Other expenses you can deduct on your include publications and subscriptions. If your work requires you to use software that costs a monthly fee, for example, or you subscribe to a specialized journal or newspaper that directly relates to your self-employment, the cost can be included in your write-offs.
Sometimes, small business owners need to hire out for projects in order to grow their business. Keep in mind, you can only deduct costs for contract labor in this category. If you have a lawyer on retainer or advance a previous contractor to a full-time employee, those costs should be deducted elsewhere. Sales tax, generally, is already included in the cost of items already deducted. For example, if you buy office supplies, you don't have to deduct the supplies and sales tax separately.
If you pay general sales tax, it's usually a better idea to take the sales tax break if you had large purchases in the tax year. We would count purchases of automobiles, long trips, or weddings among those. In the end, it's always a good idea to track your tax deductions , and calculate it with the standard deduction as well as an itemized deduction.
As a business owner, you are always better off finding the higher deduction. At the end of the day, though, the IRS wants to help fledgling and experienced self-owned businesses. They offer a ton of ways to reduce your duty like the Goodwill tax deduction. All that's left to do is search out the expenses or deductions that are just waiting for self-employed workers to capitalize on. I mean, you want to reduce the total on your tax bill, right?
That's where Bonsai comes in. If you are interested in getting a leg up on your year-end tax forms, check out our tax receipt organizer. We have everything you need to run your freelance and contracting business.
Remember, you'll need to keep receipts for three years after filing in case you get audited. So, it is vital you have clean, organized records of your receipts.
Disclaimer: Tax rules frequently change and are highly specific to your situation. Please consult a qualified tax advisor for tax advice. A verbal contract formally called an oral contract refers to an agreement between two parties that's made —you guessed it— verbally. Formal contracts, like those between an employee and an employer, are typically written down.
However, some professional transactions take place based on verbally agreed terms. Freelancers are a good example of this. Often, freelancers will take on projects having agreed on the terms and payment via the phone, or an email. Unfortunately, sometimes clients don't pull through on their agreements, and hardworking freelancers can find themselves out of pocket and wondering whether a legal battle is worth all the hassle.
The main differences between written and oral contracts are that the former is signed and documented, whereas the latter is solely attributed to verbal communication. Verbal contracts are a bit of a gray area for most people unfamiliar with contract law —which is most of us, right? For any contract written or verbal to be binding, there are four major elements which need to be in place. The crucial elements of a contract are as follows:.
Therefore, an oral agreement has legal validity if all of these elements are present. However, verbal contracts can be difficult to enforce in a court of law. In the next section, we take a look at how oral agreements hold up in court. Most business professionals are wary of entering into contracts orally because they can difficult to enforce in the face of the law. If an oral contract is brought in front of a court of law, there is increased risk of one party or both!
This is problematic for the court, as there's no unbiased way to conclude the case; often, this will result in the case being disregarded. Moreover, it can be difficult to outline contract defects if it's not in writing.
That being said, there are plenty of situations where enforceable contracts do not need to be written or spoken, they're simply implied. For instance, when you buy milk from a store, you give something in exchange for something else and enter into an implied contract, in this case - money is exchanged for goods. The Statute of Frauds is a legal statute which states that certain kinds of contracts must be executed in writing and signed by the parties involved.
The Statute of Frauds has been adopted in almost all U. S states, and requires a written contract for the following purposes:.
Typically, a court of law won't enforce an oral agreement in any of these circumstances under the statute. Instead, a written document is required to make the contract enforceable. Contract law is generally doesn't favor contracts agreed upon verbally.
A verbal agreement is difficult to prove, and can be used by those intent on committing fraud. For that reason, it's always best to put any agreements in writing and ensure all parties have fully understood and consented to signing.
Verbal agreements can be proven with actions in the absence of physical documentation. Any oral promise to provide the sale of goods or perform a service that you agreed to counts as a valid contract. So, when facing a court of law, what evidence can you provide to enforce a verbal agreement? Unfortunately, without solid proof, it may be difficult to convince a court of the legality of an oral contract.
Without witnesses to testify to the oral agreement taking place or other forms of evidence, oral contracts won't stand up in court. Instead, it becomes a matter of "he-said-she-said" - which legal professionals definitely don't have time for! If you were to enter into a verbal contract, it's recommended to follow up with an email or a letter confirming the offer, the terms of the agreement , and payment conditions.
The more you can document the elements of a contract, the better your chances of legally enforcing a oral contract. Another option is to make a recording of the conversation where the agreement is verbalized. This can be used to support your claims in the absence of a written agreement.
However, it's always best to gain the permission of the other involved parties before hitting record. Fundamentally, most verbal agreements are legally valid as long as they meet all the requirements for a contract.
However, if you were to go to court over one party not fulfilling the terms of the contract, proving that the interaction took place can be extremely taxing. Any good lawyer, contract law firm, or legal professional would advise you to make sure you formalize any professional agreement with a written agreement. Written contracts provide a secure testament to the conditions that were agreed and signed by the two parties involved. If it comes to it, a physical contract is much easier to eviden in legal circumstances.
Freelancers, in particular, should be aware of the extra security that digital contracts may provide. Many people choose to stick to executing contracts verbally because they're not sure how to write a contract, or they think writing out the contract terms is too complicated or requires expensive legal advice. However, this is no longer the case. Today, we have a world of resources available at our fingertips. The internet is a treasure trove of invaluable information, platforms, and software that simplifies our lives.
Creating, signing, and sending contracts has never been easier. What's more, you don't have to rely on a hiring a lawyer to explain all that legal jargon anymore.
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