Working as a sub-contractor can give you the freedom to make your own schedule, and it can also provide you with tax advantages you do not get when you are an employee. As a sub-contractor, for example, you can take several deductions on your taxes for business-related expenses.
Tools and Supplies
When you work as a sub-contractor, you can deduct many of the expenses that you incur throughout the course of normal business operations. For example, if you buy tools or supplies, you can deduct the cost of these items from your taxable income. When you buy supplies for your business, keep the receipt so that you can prove the expenses were actually incurred. You will not need the receipt when you file your taxes, but if you are audited, the receipts can help you prove the deduction.
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Depending on what type of work you do, you may need to have some kind of office to perform business functions in. If you have your office in your house, you can take a deduction for it. The home office deduction allows you to deduct many costs that are associated with your housing. For instance, you can deduct part of your utility bills and your mortgage payment for this deduction.
Working as a self-employed individual can also provide you with the opportunity to deduct certain medical costs. If you pay for health insurance out of your own pocket, you can deduct the entire amount of the premiums from your taxable income. To get this deduction, you have to make a profit for the year with your business. If your health insurance is a high deductible plan, you can also use a health savings account and then deduct any expenses paid with this account.
If you use a vehicle for your business, you can deduct a portion for business purposes from your taxes. To do this, you can deduct an allowance for each mile you drive or you can keep track of the actual maintenance expenses related to your car and then deduct that amount. If you want to use the mileage method, keep a logbook of the miles you drive for business purposes.