Gig Worker Tax Deductions: A Detailed List For 2024

If you’re engaged in the gig economy, you’re required to pay taxes, just like everyone else, if you earn more than $400 annually.

As a self-employed worker earning more than $400, you must pay self-employment tax and contribute to Social Security and Medicare.

One positive aspect is that you are eligible to claim a deduction equivalent to half of the self-employment tax amount on your Form 1040 income, along with other gig worker tax deductions.

Gig Worker Tax Deductions: A Detailed List For 2024

The self-employment tax deductions don’t stop there, as the IRS allows you to deduct a variety of other expenses to reduce your taxable income.

You can reduce your estimated tax payments substantially if you go through all the deductions you are permitted to make against your income.

Using a tax prep checklist comes in handy when working out the estimated self-employment tax you need to pay each quarter.

Here's a comprehensive list of self-employment tax deductions that you can claim:

25. Uniform Or Clothing Costs

You are permitted to deduct expenses related to work uniforms or specialized clothing when you pay quarterly estimated taxes each year.

It is important that these items are necessary and solely used to produce business income; otherwise, the claim will be denied.

24. Entertainment Expenses

Gig workers who incur entertainment expenses while conducting business activities can treat a portion of these costs as a deduction.

The IRS needs to confirm that the entertainment is directly associated with your gig work and has a clear business purpose.

When calculating estimated tax payments, you must keep detailed records and receipts and then report the expenses on your tax return accordingly.

23. Repairs and Maintenance

You can deduct costs related to the upkeep and repair of business equipment or property you use to complete your gig work.

The IRS mandates that these expenses are directly linked to your self-employed work and must be recorded in detail when filing your tax return.

22. Utilities

If you use utilities for your gig work, such as electricity or water, you can deduct a portion of these costs. The IRS requires that the utilities are essential for your business activities.

Keep track of the relevant expenses and report them accurately on your tax return.

22. Software Expenses

Depending on what your gigs are, you may lay out a substantial amount of money each year for the software to do your job.

All of these costs are deductible and should be included in your deduction calculations, as they could result in substantial tax savings.

This is one of the best financial tips for working in the gig economy, as many workers forget how much they spend on software.

21. Technology Expenses

Deduct all the costs associated with technology essential for your gig work, such as software and hardware, including apps loaded on your phone.

The IRS requires that these expenses directly relate to your business, so photo apps, productivity apps, and the like may be valid deductions.

While accounting terms can be confusing, separating your expenses into categories will help you to allocate them.

20. Bank Fees

An often overlooked tax deduction is the fees incurred for business-related banking services, which can add up over the year.

It is best that you keep a separate bank account for your business earnings so that there is no doubt that these costs relate to your gig work.

19. Depreciation

If you own business assets that decrease in value over time, you can deduct a portion of their depreciation each year.

Assets that you can claim include computers, printers, cell phones, and any specialist equipment that is particular to your job.

The IRS requires accurate records and adherence to their depreciation schedules when claiming this deduction, as each asset has a different depreciation rate.

18. Professional Fees

You can deduct any fees paid to professionals, such as consultants, lawyers, and accountants, for services related to your gig work.

The fees must be directly connected to your business activities, so basic accounting principles apply in maintaining detailed records.

20. Licenses

If your work requires a specific license, then you can deduct the costs associated with obtaining and renewing licenses essential for your gig work.

If you operate a drone commercially or have a pilot’s license and need it to complete your gigs, then you can deduct them.

19. Office Expenses

With many people working from home, the IRS is diligent about checking eligibility to deduct costs related to maintaining a dedicated office space.

The tax code stipulates that the office space should be used "regularly and exclusively" for your business, so make sure it isn’t a shared area.

You can capture office-related expenses on your tax return, utilizing the simple or detailed calculation method, whichever is most suitable.

18. Materials And Supplies

One of the best financial tips for working in the gig economy is to deduct expenses for materials and supplies essential for your gig work.

The definition of materials and supplies is broad, so make sure you keep all your invoices and receipts to link them to your business activities.

17. Contract Labor

If you are assisted by freelancers or subcontractors for services you provide, then you can deduct those payments from your income.

You’ll need to keep a record of each payment, making sure that you include the details of the work provided.

16. Advertising

Any cost you incur when promoting and advertising your gig services is a deductible expense that can reduce your tax liability.

Just make sure that the advertising expenses are directly connected to your business or can reasonably be expected to result in work.

15. Startup costs

When working on accounting for startups, we often see various expenditures to set up a business, such as legal advice or reports on potential markets.

The tax code allows you to deduct products, labor supply, transportation facilities, advertisements, and salaries as startup costs.

So long as you keep detailed records of all the costs associated with setting your business up, you can claim them against your income.

14. Business Insurance

You can deduct the premiums you pay for insurance coverage related to your gig work, such as liability cover or short-term asset insurance.

Any equipment covered by insurance you use to complete your gigs is considered an allowable deduction that reduces your tax bill.

13. Rent

If you need to rent a workspace or property for your gig work, you are allowed to deduct all the associated costs from your income.

Only rent directly related to your business activities is allowed as a deduction, so make sure you have your lease agreement available.

12. Publications And Subscriptions

Another great deduction relates to any publication or subscription needed for your business, such as industry news or reviews of new technology.

As with all the other deductions, the publications and subscriptions should be directly linked to your business and can be electronic or physical products.

11. Credit Card Interest

Any credit card interest that you pay on your business cards is an allowable deduction, and you can use it to reduce your tax bill.

The best way to ensure you can claim the interest is to have separate business and personal credit cards.

Your bookkeeper or accountant can then capture the interest expense correctly and not get it mixed up with your personal credit.

10. Business Loan Interest

Should you require funding to start your business, any interest paid on those loans used for your gig business is a valid tax deduction.

Keeping accurate records of your business loan interest is merely a matter of keeping your bank statements and entering the interest charges in your accounts.

You may require freelance tools to enhance your freelancer portfolio, in which case interest on a business loan can be a valid deduction.

9. Business Travel

Any travel you undertake for business purposes that takes you away from your home or business premises is considered a valid deduction.

You are required to be away from home for more than your normal work day and incur expenses for somewhere to sleep overnight.

Conventions are included in allowable travel expenses, including national and international trips, with certain provisos for foreign trips.

Included in these deductions are the cost of traveling in a car, bus, airplane, taxi, or train, as well as shipping and baggage fees.

You are also allowed to claim the cost of accommodation, food, cleaning and laundry, tips, and any expenses related to travel.

If you must spend time away from your home on assignments of less than one year, then you can also claim those travel expenses.

8. Meal Expenses

Changes in “The Tax Cuts and Jobs Act” allow you to deduct up to 50% of any meal expenses directly related to your gig work.

You must prove that the expense occurred while discussing or conducting business with a potential client and cannot be excessively lavish.

Self-employed individuals can reduce their tax bill by keeping a strict record of all meals throughout the year.

7. Retirement Plan Contributions

Any retirement plan contributions that self-employed individuals make can qualify as a deduction against their income, subject to certain rules.

There are various retirement plan options available to gig workers, including traditional or Roth IRA, Solo 401(k), SEP IRA, SIMPLE IRA, or defined benefit plans.

The tax implications of the various retirement plans are complex, so it’s best to discuss your options with your tax accountant before making a decision.

6. Health Insurance Premiums

Aside from claiming medical expenses as tax deductions, self-employed individuals may claim the premiums they pay for medical insurance.

Medical insurance can cover procedures and medicines, transport to the hospital, and long-term care contracts.

5. Internet

While you can claim your internet costs as tax deductions, it is not as simple as just including 100% of your service provider’s bill.

If you spend most of your work day online to complete gig work, then you can claim 50% to 75% of your internet bill, as that is reasonable.

If you’re working from home, then the other 30-25% is most likely used for private purposes that have nothing to do with your job.

4. Phone Bill

You may also deduct a portion of your phone bill as a business expense, depending on what type of work you do and the reasonableness of the deduction.

If your gig work is conducted mostly over email with very little time actually spent on the phone, then claiming 20% of your phone bill may be reasonable.

The IRS requires that your phone usage is directly associated with your taxable income, and you must prove that should they query the amount.

3. Education Deduction

There are two ways that education costs benefit you when submitting your tax return, either as a deduction or a tax credit.

If your gig work requires that you maintain a professional accreditation with a professional body, they may require you to take certain courses.

The costs of continuing education programs can be treated as a deduction, as you cannot conduct your business without them.

Education costs can also reduce your tax liability as a tax credit through the American Opportunity Tax Credit and the Lifetime Learning Credit.

2. Mileage Deduction

You can claim a deduction on taxable income for the miles you drive for business purposes subject to various rules laid down each year.

There are two ways to determine your deduction: Using the IRS-determined standard mileage rate or calculating your actual expenses.

The standard rate is easier but must usually be used in the first year that you claim, while actual costs require a detailed calculation.

You must then keep an accurate record of your mileage and expenses, including gas, oil changes, maintenance, and insurance costs.

1. Home Office Deduction

You can deduct a home office expense if you have a workspace in your home used "regularly and exclusively" for your gig work.

There are two calculation methods that you can use to calculate your self-employment taxes: The simple method and the detailed method.

The simple method ignores actual costs and allows you to deduct $5 per square foot, up to 300 square feet or $1,500.

To use the detailed method, you must keep accurate records of mortgage interest, utility bills, homeowner's insurance, home repairs, etc.

You then need to carefully calculate the percentage of your home's square footage used for the home office and claim that percentage of your expenses.

Summary

As a gig worker in the United States, you have access to a myriad of self-employment tax deductions that can significantly lower your taxes.

By understanding the IRS requirements for self-employment taxes and learning how to claim expenses accurately, you can save on your overall tax liabilities.

Armed with this knowledge, you can confidently approach tax season, knowing you’ve explored all the avenues to retain a larger share of your earnings.