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August 2, 2020

What can you expense as a freelancer? The E-commerce Edition 💻

Lil

You make things and sell them online. Here’s what you can deduct from your taxes.

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You work with your hands. You sew clothes, you design jewelries or build nightstand. You go to the post office every day. You draft invoices, respond to customers’ emails, edit pictures of your products. When exactly are you supposed to organize and prepare for your taxes?! 😉 Well, that’s exactly when a Lili checking account comes in handy and why we wrote this recap of what you can count as a business expense if you run your own online store. (Lili is available on iOS and Android)

Note: These deductions apply only to your taxable income. Sales taxes on sold products are always due in full and are based on your state law. For more details and information, always refer to this IRS article regarding business expenses.


Shipping supplies

  • Envelopes,
  • Giftwraps,
  • Postage,
  • Letter scale,
  • Scotch tape,

Everything you use to wrap your products and ship them across the country (or the world) count as a business expense.


Online store

  • Marketplace commissions,
  • Payment apps fees,
  • Domain registration,
  • Website hosting
  • What you paid a photographer to take pictures of your product,
  • Or the camera you used to take pictures of your products,

Everything you used to design the best store on the internet (and therefore get tons of orders!) is tax deductible


Computer Software and Hardware

  • Phone, computer, tablet, smartpad, digital pen, printer, mouse, keyboard…
  • Subscription to software (Adobe Creative, Microsoft…),
  • Subscription to services (Google, WordPress…),
  • Cell phone bill and data usage,

Everything and anything you use for your business when your screens are on.


Online Marketing

  • Domain registration,
  • Social Ads,
  • Website hosting,
  • Themes and plugins for your online portfolio,
  • Fonts and stock visuals…

Everything you spend to market yourself online is tax deductible.


Office Expenses

  • Printer’s ink
  • Paper,
  • Sketch pads,
  • Staplers…

All your office supplies are tax deductible.


Home Studio

If you use a part of your home exclusively as a workshop or for storage, you can deduct the percentage of that space on your rent and/or mortgage. Note that the IRS also offers a simplified option for this: $5 per square ft, capped at 300sq/ft

  • Desk, furniture and decor,
  • Portion of your utility bills (water, electricity, internet)
  • Portion of your property/renter’s insurance…


Client Meetings

If you meet clients or customers face-to-face, 50% of the cost of the food and drinks on the table between you is tax-deductible.


Transportation

No matter the vehicle you used to meet that customer or go to the post office, whatever you spent on that vehicle or to make that vehicle move is a work expense: bus or subway ticket, gas, van or truck rentals… If you use your own car, track your mileage and check how much you can deduct per mile for the current year.


Classes and Training

Did you take a class to learn a new skill to be more efficient or expand your offerings? These expenses are tax-deductible.


Subscriptions and dues

  • Legal and accounting fees
  • Business bank & credit card fees
  • Agent/manager commissions
  • Magazine subscriptions,
  • Streaming service subscription …

Whatever you spend to keep your business in good standing and stay up to date with the trends in your industry is part of your work expenses.


Health Insurance

Gotta be in good health to do business! Some of your health expenses (premiums and a portion of your out of pockets…) are tax deductible EXCEPT if you’re covered under a spouse or a relative’s plan.


Conference and Festivals

If you participate in a business conference or walk the aisles at an artisan festival, the cost of your trips (conference pass, tickets, 50% of your meals, hotels) is deductible.


Business Trip

If any other trip for work is more than 100 miles away from your home, it counts as a business trip, therefore all the expenses engaged are tax-deductible: hotel nights, 50% of your meals, transportation…

For more details and information, please refer to this IRS article on business expenses. 

Lili mobile banking

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Lil

Banking Designed for Freelancers

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