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Join #1 A.I. tax service for freelancers
- Why FlyFin
- File Taxes
- Calculate Taxes
- How FlyFin works
- Quarterly Taxes
Resources
Quarterly Tax Calculator
IRS mandates you to pay Q3 taxes by Sep 16
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For a lot of freelancers and gig workers, your car is your life. When you work as a delivery driver, you pretty much live in your car, and if you're an independent contractor, you probably spend a significant amount of time driving from one job site to another. So it's only natural to assume that your car payment can be considered a business expense and to think you can claim your car payment tax on taxes you paid on your annual tax return.
It's natural for freelancers who use their cars to expect to claim a car tax write-off on their 1099 tax. But if you bought a car and are making monthly payments, or you're leasing a car, the payments are not actually tax-deductible. But there are still car-related business expenses that you can write off and save significantly on your taxes. An estimated income tax calculator is a good tool that can help you with this and make quarterly tax payments on time. Key takeaways:
- Your car loan payments may not be fully tax-deductible
- There are car-related expenses that you can write off from your taxes
- Including your car as a business expense opens the door to several other forms of tax deductions
Table of contents
Car loan interest...Read more
Standard Mileage method...Read more
How does the standard mileage method actually work?...Read more
Should you use the standard deduction method?...Read more
Let's get back to writing off that car loan interest...Read more
Who should use the actual expenses method?...Read more
Using FlyFin for the actual expense method...Read more
Car loan interest
The majority of freelancers who use a car for their business use their personal vehicle. If you drive for Uber, for example, and you financed the purchase of the car you use, the interest you pay on your car loan is a vehicle tax deduction. So, although your monthly payment may not be a write-off, the interest you pay in a given month is, as are many other Uber-related expenses. It works in the same way as other vehicle tax deductions, like gas, car repairs or any expense you would enter on Schedule C of your 1040 tax return. The IRS gives you two ways to deduct car loan interest: the standard mileage method and the actual expense method.
Standard Mileage method
This method rolls all your deductible car expenses into a mileage rate that the IRS sets each year. It's simpler than the actual expenses method, but generally you save less on taxes. With the Standard Mileage method, you don't itemize each vehicle-related expense on your tax return but simply write off the mileage rate amount for every mile you drive while working for Lyft. In 2023, you can write off $0.66 per mile during the first half of the year and $0.625 from July until the end of the year. In 2024, the IRS increased the rate to $0.67.
Tips for using the Standard Mileage method
If this is your chosen method for writing off car loan interest and every other car-related tax deduction, there are a few things you'll need to do, or the IRS won't allow you to take the deduction, and a few other things to be aware of. Mileage log You'll need to keep solid records of the miles you drive for work in the form of a mileage log. You can do this the old-school way by keeping a notebook and pen in your car and recording the mileage for each trip, or you can use one of the many apps on the market that automatically tracks your mileage through your phone's GPS. Trips not for work Remember that trips that aren't for work, like from dropping off a rideshare client to the restaurant where you're grabbing lunch, are not tax-deductible. Or if you're doing a job as an independent contractor, the miles you drive from your home to a job site are not deductible as they are considered to be "commuting miles". Track expenses There are still a handful of expenses that can be considered a car tax write-off, even if you take the Standard Mileage deduction. You'll need to track them because they're not included in the standard mileage rate. You can do this using spreadsheets and saving receipts, or you can use an app like FlyFin to let A.I. automatically track your expenses so you don't miss a single deduction. You can also write off car depreciation as a deduction over a period of years or in the first year you put it into use.
How does the standard mileage method actually work?
Say you recorded mileage for 1,300 trips while driving for Lyft in 2023, and 600 of the trips were before July 1, 700 after. You would apply the $0.67 per mile rate to the first 600 trips and the $0.625 rate to the next 700. On top of that, you spent $2,400 on parking, buying new license tabs for your car and getting car washes. These three amounts together would make up your entire standard mileage deduction, which you'd record on Schedule C of your tax return.
Should you use the standard deduction method?
If you do a ton of driving for work, as you would if you worked for Uber or for a delivery service like Doordash, the standard deduction might save you more on your tax bill, but in most cases, the actual expenses method will lower your taxable income even more because there are so many deductible expenses available in so many categories. This is especially true if you're a more typical freelance or self-employed person who works from a home office, for example. Find out more about which is best for you in our breakdown of the standard mileage method vs. actual expenses.
Let's get back to writing off that car loan interest
Write-offs like this are only possible with the actual expenses method, which allows you to deduct any car expense that's directly related to your self-employment work. This includes the interest from your car loan. Here's how that works. Most freelancers use the same vehicle for personal use and work use. The percentage you use for work is the one that will affect your taxes because you can apply it to all of your car expenses. It already seems complicated, right? But the formula is actually simple. If 60% of the time you use your car is spent driving for Uber, you can deduct 60% of your car loan interest or any other car tax write-off. That means car repairs, gas, oil changes, new wiper blades and even your cellphone bill, if you use it for rideshare driving, can all qualify as business expenses.
Who should use the actual expenses method?
It's clear that the actual expenses method generally saves more in self-employment taxes than the standard mileage rate with the exception of like rideshare drivers and truckers. To use this method, record-keeping becomes even more important because you need to know exactly what you spent on everything from that last interest payment to the last time you were at the pump. Fortunately, there are apps like Flyfin that use A.I. to track every business expense, including car expenses, automatically 24/7 to find every possible tax write-off.
Using FlyFin for the actual expense method
If you're working as a freelancer, whether you're receiving a 1099 from Uber or working from home as a graphic designer, FlyFin makes taxes for self-employed individuals effortless. From finding tax deductions year-round to offering round-the-clock tax expert support for any questions freelancers have, FlyFin takes 95% of the work out of freelancer taxes and provides 100%-accurate state and federal tax filing at tax time.
Depreciation Tax Deduction
The depreciation tax deduction can be claimed for any asset that is used for business. There are three methods to calculate this deduction.
LEARN MORE →
Education Expenses Tax Deductible
Education expenses are tax-deductible for self-employed individuals as long as they are related to their current job. Report the deductions on Schedule C.
LEARN MORE →
Internet Bill Tax Deduction
For many who work from home, the internet is necessary for doing business. For some people, their internet bill counts as a tax write-off.
LEARN MORE →
Home Office Deduction
How the home office deduction saves self-employed individuals and freelancers on their taxes.
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Home Improvement Deduction
What qualifies as a home improvement tax deduction and how homeowners who are self-employed or freelancers can benefit most.
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Travel Expense Deduction
If you travel for work as a freelancer, there are a number of travel expenses you can claim as tax deductions in 2024 – find the details here.
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Food and Entertainment Deduction
For 2024, you can deduct 50% of the cost of business meals as tax deductible – but not every meal can be deducted. This is relevant to self-employed people.
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Car depreciation tax
Here's how to take advantage of depreciation, one of the biggest tax deductions people who use their car for work can take.
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Car tax write off
Many freelancers drive their own vehicle for business and may qualify for certain car and mileage tax deductions.
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Moving expenses deduction
Until recently, you could deduct moving expenses on your tax return. Recent changes to the tax rules have impacted whether you can deduct moving expenses.
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Simplified home office deduction
If you use space in your home as an office for your business, you can take either the actual home office deduction or the simplified home office deduction.
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Rent Tax Deduction
If you're self-employed, there are few ways you can write off your rent, and if you know how to use them, they can be among the most important ways to save money on taxes each year.
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Side Hustle Taxes
Self-employed individuals can write off business expenses when filing side hustle taxes. You can avoid paying taxes on side jobs if your net income is under $400 in a year.
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Mileage Tax Deduction
Get a car mileage tax deduction using either the standard mileage deduction or actual expenses deduction. You will report this on Schedule C.
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Cell Phone Tax Deduction
A cell phone tax deduction is available to self-employed individuals if it is used for their business. They can also write off their internet usage.
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Business And Consultant Tax Deduction
Consultant tax write-offs are useful in lowering self-employment taxes. Sole proprietors can use a QBID to lower taxable income, as they are a pass-through business entity.
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Is Credit Card Interest Tax Deductible?
Credit card interest is tax-deductible if it is from a business-related purchase. You can write off a portion of the interest even on a personal credit card if it comes from a business expense.
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Are Office Expenses Deductible?
The home office tax deduction is used to write off your home office and office-related expenses. Claim it using the standard or simplified method.
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Advertising And Marketing Expenses Deduction
Marketing tax deductions related to promoting a business can be claimed by self-employed individuals. Report them on Schedule C.
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Business Startup Costs and Deductions
Business startup costs can be amortized over 15 years. You can also deduct up to $5,000 in the first year if total costs are below $50,000.
LEARN MORE →
Vehicle Write Off For Business
Vehicles used for business can be a tax write-off in 2024. You can claim this deduction even if you lease your vehicle under the actual expenses method.
LEARN MORE →
Are Subscriptions Tax Deductible?
Subscriptions are tax deductible for self-employed individuals. You can write off the business use percentage as a tax deduction on Schedule C.
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Depreciation Tax Deduction
The depreciation tax deduction can be claimed for any asset that is used for business. There are three methods to calculate this deduction.
LEARN MORE →
Education Expenses Tax Deductible
Education expenses are tax-deductible for self-employed individuals as long as they are related to their current job. Report the deductions on Schedule C.
LEARN MORE →
Internet Bill Tax Deduction
For many who work from home, the internet is necessary for doing business. For some people, their internet bill counts as a tax write-off.
LEARN MORE →
Home Office Deduction
How the home office deduction saves self-employed individuals and freelancers on their taxes.
LEARN MORE →
What’s FlyFin?
FlyFin caters to the tax needs of freelancers, gig workers, independent contractors and sole proprietors.But anyone can file taxes through FlyFin! FlyFin tracks all your business expenses automatically using A.I. technology. Then, our CPA team files a guaranteed 100% accurate tax return for you – to save you a couple thousand dollars and a ton of time on your taxes.In addition, you can download the FlyFin app and have your taxes filed in less than fifteen minutes, saving time and money.
Expert tax CPAs ensure 100%-accurate tax filing
A.I. finds every tax deduction, eliminating 95% of your work
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