Top Tax Deductions for Freelance Tutors
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Freelance tutoring is a great way to earn some extra cash. Sometimes it can even turn into your full-time income stream. But being a freelancer means you are an independent contractor, not an employee of a company. In this case, the Internal Revenue Service (IRS) considers you to be a small business owner, and you must pay your taxes accordingly.
While filing taxes as a freelancer is slightly more time-consuming, tax time can be a breeze with the right tools and knowledge. You just have to remember to keep track of your business-related expenses so you can deduct those from your business income come tax season. By claiming the right tax deductions, you can lower your taxable income which in turn reduces your tax liability and puts more money back into your pocket.
Freelance tutors are eligible for a few special deductions. Tutors essentially are running mini classrooms and often have many expenses that go with that. Fortunately, you can claim deductions for many of your tutoring expenses. Here are the top tax deductions for freelance tutors.
Office and school supplies
Freelance tutors likely need a variety of school supplies to effectively teach and help students. The good news is that any office or school supplies you purchased for your tutoring sessions are tax deductible.
Basic supplies, such as paper, pens, and software are all deductible if they are used directly for your business. Even larger expenses, such as computers and advertising costs are tax deductible if used solely for work. TaxAct can help you easily understand your deductible expenses, helping you achieve the best tax outcome possible.
Your home office
If you run your tutoring business from a home office, you may be eligible to claim the home office deduction. Further, you can deduct the cost of a coworking space, if you work there instead of at home.
Along with your home office, you can also deduct a portion of your phone and internet expenses, if applicable. Even if you use the internet and phone for personal use too, you can deduct part of the cost as a business expense.
Another deduction related to your home office you may overlook is furniture. For instance, purchasing a chair or desk for your students is considered a necessary business expense and generally is tax deductible.
If you belong to a freelancer union, you are more than likely required to pay union dues. Those dues help cover the cost of education, events, and other activities provided to the union members.
Since union dues are required for membership, the cost of membership is considered a deductible expense because it’s necessary for the growth of your business. That includes any union initiation fees too. On your tax return, they can be fully deducted on Schedule C as a business expense.
As a tutor, you can deduct transportation expenses if that travel was for business purposes. For example, if you met a client at a school or a library for your tutoring session, you could deduct the mileage.
To have an accurate record of your travel expenses, keep a running mileage log in your car or use a free app that calculates the miles as you drive. For more information on how to deduct travel expenses, you can see our post here.
Continuing education and seminars
In order to gain more skills or knowledge about the tutoring business or a teaching-related subject matter, you may consider continuing your education at some point. Whether that means taking a few classes or traveling to a seminar, the IRS acknowledges freelance tutors often pay those entry fees out of their own pockets. Because of that, they are viewed as a deductible expense.
As always, be sure to keep all receipts to back up the deductions you claim.
Launching your business usually requires you to earn some type of licensing, and fortunately, you can deduct licensing fees on your tax return.
Such licensing deductions include the cost of registering for a business license, insurance, and website registration and fees.
For anyone who is required to take exams to license themselves as a professional, those related expenses are deductible as well. Any yearly fee or testing fee you pay to a licensing organization are deductible on your federal income tax return too.
Athletic and musical equipment
As a music or sports instructor, equipment is a necessary part of your sessions. Instruments and sports equipment are generally deductible. Depending on the type of equipment, it can be depreciated over time or expensed in one year.
Equipment maintenance costs are also tax deductible, so don’t forget to keep the bill for those services.
Remember, as a freelance tutor, you are responsible for paying all of your self-employment tax and keeping track of business expenses. In order to make tax time easier, there are some general rules you can follow.
- To keep track of all your income, be sure to use the same invoice system for every client. Don’t forget to keep a record of your total earnings and what each separate client paid you.
- While it may be tempting to spend your income as soon as it comes in, as a freelancer, you are responsible for paying estimated quarterly taxes. Set aside part of your income each month so you are prepared for that payment every quarter. If you don’t make quarterly payments, you could be left with a large tax bill when you file along with potential penalties.
- As you spend money on your tutoring business, create a system for keeping track of expenses. That includes materials, equipment, technology, and mileage. Make sure to keep copies of all receipts from the date of purchase.
By organizing your finances on the front end, you will save time and ensure you are always getting the best tax outcome.