Working as an IT Consultant has many benefits over being a full-time employee. Your schedule is your own, your work stays new and interesting, and your profit margin can be much higher. One of the reasons your bank account benefits from Independent Contractor status is the many tax deductions available to those who work for themselves. While there are added expenses like insurance and equipment, knowing which ones are tax deductible can save you a remarkable amount of money over the course of a year.
The most important thing is to keep detailed records and receipts of anything you plan to deduct – so it’s helpful to know what to track well in advance. Here are five tax deductions every tech consultant should be aware of:
1) Your Home Office
If you are one of the 43 percent of US workers who work remotely, your home office is the center of your professional universe. If you use that office exclusively for business, those costs are completely deductible. That includes anything from printer cartridges to heat and electricity, and can even encompass a portion of your rent or mortgage payments. The key requirement is that anything deductible must be used only for business – meaning you can’t deduct your heating expenses if your home office is where you spend leisure time as well.
For any independent professional, networking and reskilling are key components of a successful career. For many, that includes industry conferences. Though expensive endeavors, many of the expenses associated with industry conferences can be deducted from your income. Not only is the ticket price deductible, but travel expenses, accommodations and meals, and even lost revenue from not working during the conference can be taken into account as well. Keep detailed records of your spending during conferences – the tax deduction can make them much more affordable.
3) Self Promotion
One of the more difficult things for an IT consultant is self-promotion. You have incredible skills and knowledge, but none of that matters if the people who need you don’t know that you exist. Self-promotion is essential, but advertising, networking, and maintenance can be expensive. The good news is, most of these costs are tax deductible. Anything from purchasing an ad in techcrunch to upgrading your LinkedIn subscription can be counted against your income. When it comes to social media sites like Facebook, it’s important to have distinct business and personal profiles. The rules for these spaces are similar to a home office – to be tax deductible, it has to be exclusively business related.
As a self-employed IT consultant, some of your most significant expenses will be insurance related. Because it’s essential to the health and wellness of both you and your business, you can deduct most insurance expenses come tax time.
Many independent contractors will avoid purchasing professional liability insurance because of the high prices and year-long commitments pull it over their budget. However, because most clients will require IT consultants to be insured – whether explicitly in a contract or implicitly in their hiring decisions – your premiums will be tax deductible. Another way to soften the financial blow business insurance can have is to purchase usage based products tailored to your contracts, rather than year-long policies. For help building your perfect policy, reach out to Bunker’s insurance advisors anytime at firstname.lastname@example.org. Bunker’s Digital Certificates of Insurance make it easy to keep track of your business insurance expenses when tax season rolls around.
5) Continued Education
As you know, the world of technology is growing and evolving too quickly for anyone to keep up with on their own. While helping your current clients get the most out of their existing systems, your potential future clients are surging ahead with state-of-the-art technology. In order to remain competitive in the IT space long term, you’ll need to stay up to date on the latest industry expertise. Online courses are one way to keep up with the pace of change, but they can be expensive. Fortunately, these are tax deductible as long as the classes are clearly related to your current business. For example, online French classes for your upcoming trip to Paris will not be deductible as a business expense – unless you plan on expanding your business to France.
Take the Deduction That Gives You a Competitive Edge
As an independent professional, your job depends on your ability to stand out from the crowd. Show potential clients that you’re an expert on the latest tech trends. Show them a professional liability policy that protects both of you should anything happen. Invite them to your impressive new office space, and bring out the wine. Set yourself apart from the crowd, keep your receipts, and watch the tax deductions stack up!
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