Independent Workers and the Gig Economy: Expenses They May Deduct

Many independent workers pay more taxes than necessary… simply because they do not know which expenses related to their activity may be deductible.

Rideshare drivers, delivery workers, freelancers, consultants, content creators, and other self-employed individuals may have necessary expenses to generate their income.

According to the IRS, an expense may be deductible when it is ordinary and necessary for conducting the business activity.

Who May Claim These Deductions?

These deductions may benefit people who earn income as:

• Uber or Lyft drivers

• Delivery workers

• Freelancers

• Consultants

• Content creators

• Independent sellers

• Professionals who work for themselves

  
  

The income and expenses from many of these activities are generally reported on Schedule C of Form 1040.

What Expenses May Be Deducted?

Not every purchase qualifies as a deduction.

The expense must be directly related to the work or business. If a service or item is used for both personal and business purposes, generally only the business portion may be deducted.

Some of the most common expenses include:

Vehicle and Mileage

If you use your vehicle to make deliveries, transport passengers, visit clients, or purchase materials, you may be able to deduct the portion related to business use.

Depending on the applicable rules, you may use:

• The standard mileage rate

• Actual vehicle expenses

  
  

It is important to keep a record of the miles driven for business purposes.

Phone and Internet

You may be able to deduct part of your phone and internet expenses when they are used to:

• Communicate with clients

• Receive orders

• Use work-related applications

• Promote services

• Manage the business

  
  

If you also use them for personal purposes, only the business percentage should be claimed.

Materials and Equipment

Items needed to perform the work may also be deductible, such as:

• Tools

• Office supplies

• Computers

• Printers

• Cameras

• Software and applications

• Equipment related to the activity

Depending on their cost and useful life, some equipment may be deducted immediately or through depreciation.

Platform Fees

Digital platforms may deduct commissions, service fees, or payment processing costs before depositing the money.

These charges may be considered business expenses.

For this reason, it is important to review each platform’s reports and not rely only on the amount deposited into the bank account.

Advertising and Professional Services

Expenses used to promote the business may also be deductible, for example:

• Social media advertising

• A website

• Business cards

• Flyers

• Graphic design

• Promotional materials

  
  

Payments made to accountants, attorneys, tax preparers, consultants, and other professionals related to the business may also qualify.

Home Office

If you use part of your home regularly and exclusively to operate or manage your business, you may qualify for the home office deduction.

A portion of expenses such as the following may be considered:

• Rent

• Utilities

• Insurance

• Repairs

• Maintenance

  
  

The space must meet the requirements established by the IRS.

Key Rule

A personal expense does not automatically become a business expense simply because you are self-employed.

To claim a deduction, you must be able to show:

• What you purchased

• How much you paid

• When you made the payment

• How it relates to your activity

• What percentage corresponds to business use

  
  

The Importance of Keeping Documents

It is recommended that you keep:

• Receipts

• Invoices

• Bank statements

• Platform reports

• Mileage records

• Proof of payment

• Contracts

  
  

These documents can help you prepare a more accurate tax return and support the deductions claimed.

Common Mistakes

Some common mistakes include:

• Failing to report all income

• Claiming personal expenses

• Failing to separate personal and business use

• Failing to track mileage

• Losing receipts or invoices

• Reporting only the amount deposited

  
  

Benefits of Properly Tracking Expenses

Keeping good records can help you:

• Legally reduce taxable business profit

• Avoid mistakes

• Prepare a more accurate tax return

• Understand the true cost of your activity

• Be prepared in case of an examination

  
  

Conclusion

Independent workers and people who participate in the gig economy may deduct different expenses related to generating their income.

Vehicle costs, phone, internet, materials, advertising, platform fees, and professional services are some of the expenses that may qualify.

However, each deduction must be related to the business, comply with IRS rules, and be supported by documentation.

Maintaining records throughout the year can help you reduce errors and properly take advantage of the deductions available.