Running and managing a side hustle, small business, or new startup is a time-consuming endeavor that can already add stress to your life.
Taxes, even for a CPA like myself or other financial professionals trained in tax preparation and interpretation, can still be a stressful and complicated part of business life. Making this even more pronounced is the fact that Millennials, identified by many as an entrepreneurial generation, have side hustles they have started in their spare time.
If you drive for Uber or Lyft, rent out a room (or rooms) on Airbnb, do product reviews on YouTube, or freelance an occasional article on your favorite gaming site, you are running a side hustle. Some of you might even have carved a full-time income and business out of side hustles, and kudos to you.
What you might not realize, while you are running your side hustle, working full time, and maybe trying to have a social life, too (how unrealistic, I know), is that there are business deductions you might be missing out on.
Here's the best part: Even if you missed out this year, or have to do some additional paperwork to get yourself set up, there's always next year to improve and get it right.
The seven tips listed here are obviously not exhaustive. But hopefully one or two are applicable to you and your business, or will point you to one that is:
All those rides you're giving people to the airport, or to other places? Yep, in addition to reporting the income (Form 1099), you might be able to deduct business mileage--even if you're using a personal vehicle.
2. Startup Costs
Realistically, your new business or startup might not take off like a rocket right away. It might be years until you start generating some serious income. Fortunately, the IRS gives entrepreneurs an opportunity to claim startup costs, and you can even do it retroactively.
3. Health Insurance
As if we have not heard enough about health insurance and health coverage this year, this is also an area to keep an eye on for tax purposes. If you do not have access to employer-subsidized health insurance, and you set up insurance for business purposes, your premiums might be tax deductible.
4. Home Office
If you run your business out of your home regularly, and that portion of your residence is used only for your business, you are eligible for the home office deduction. The simplified option gives you a $5 deduction per square foot, up to 300 feet, for a possible total of $1,500.
5. Going Green
Sustainability is good for the environment, and might even be able to help you out come tax deduction time! If you have a hybrid, or are thinking of getting one, you might qualify for the IRS Plug-In Electric Drive Vehicle Credit. Never hurts to do some homework!
6. File an Extension
Taxes have to be paid, but if you need a little extra time to get yourself organized--and hopefully take advantage of some these deductions and credits--that is completely an option. Use Form 7004 to give yourself some extra breathing room to make sure you get it right.
7. Itemize or Not?
Depending on which state you live and work in, the answer will be different for every entrepreneur and business. It might actually turn out that the annual standard deduction (for individuals) might work better for you depending on how you are running your side hustle or small business.
8. [Bonus] Go to the Experts
This is something I cannot stress enough, and it can save you time, headaches, and--more importantly--money. Going to a CPA or other certified financial professional who is familiar with you, your finances, and your business goals is always an ace up your sleeve.
These people know the rules and are trained to keep themselves up to date. Getting some professional advice can only help.
Taxes are rarely a fun experience, or something that small-business owners and entrepreneurs look forward to, but that does not mean you should give them short shrift. You work hard for your money, and doubly hard for the money you earn through your entrepreneurial activities, so why not take advantage of all the options available?
Approaching your taxes, and tax opportunities, for your small business and side hustle just might add some serious money in your pocket.