Skip to main content
Blog Home
Start Your Business
Grow Your Business
Protect Your Business
Celebrate Courage
Search

Small Business Insider

Sign up to get the latest small business tips delivered right to your inbox.
Close Close
Grow Your Business
Image of man's and woman's hands on table holding receipts and doing business taxes

5 Tax deduction tips for your side hustle or small business

Finances | Management
By: Hiscox Blog

Share Image

Embed Image

Copy

Share Article:

To the relief of many small business owners, the 2020 federal tax deadlines were pushed back to July 15, 2020. This comes in response to the COVID-19 pandemic negatively impacting business revenues. As a result, it was decided back in March to extend the April 15th filing and payment deadlines to July.

For those gearing up for the July 15th deadline, there are some important tax deduction tips you should know in order to save money this year. Since many small business owners are having to tighten the purse strings, these money-saving deductions could be crucial to help you retain cash this year.

Pro tip: Here are the exact ingredients required to turn a side hustle into a small business.

Here are five deductions that can lower your taxes.

1. Dedicated home office

If you have a home office that is primarily used for your business, you can take a tax  deduction on it. However, it has to be a specific room. It can’t be a situation where you work on your living room couch a few hours a day or from bed with your laptop.

If your workspace meets the right criteria, then it’s a simple matter of figuring out the square footage of your home and dividing that by the square footage of your office. That is the percentage that can be deducted for expenses such as rent, utilities, insurance, etc.  

2. Vehicle expenses

There are two ways to deduct if you use your vehicle as part of your business. The first takes into account your actual expenses for business driving. The key here is keeping meticulous records, especially if you also use your car, truck, or van for personal travel. The list of deductions includes your costs for vehicle registration fees, gas, insurance, repairs, and oil. 

If careful record keeping isn’t one of your strong suits, consider taking the standard mileage deduction instead for business driving. It’s easy and straightforward. Keep in mind this rate changes every year, but calculating your deduction is a simple matter of multiplying your business miles by the rate for that year. 

3.  Supplies  

Are you a freelance copywriter who bought new office equipment, such as a laptop or printer? Did you buy supplies for your pet grooming side hustle? The good news is that supplies you buy for your business can be deducted as long as they are only used for business purposes.

4.  Professional services

As a small startup, there’s probably a good chance you don’t have a team advising you. But that doesn’t mean you didn’t reach out for some professional help during the tax year. For example, did you hire an outside expert to help you expand your flower shop’s customer base? Did you pay someone to create your website? It’s always a good idea to check with a tax professional – whose services might also be deductible – but chances are that the payments you made toward professional services are tax deductible.  

5.  Estimated taxes

While all those deductions can help reduce your tax burden, failing to pay your estimated taxes is a good way to get penalized by the IRS. Those payments are generally due on the 15th of April, June, September, and January.

A good rule of thumb for how much to save for your federal and state taxes is 30 to 40 percent of your weekly business income. In other words, if you make $500 in a week, you should set aside $150-$200. It’s a lot, but if you overpay, you’ll get a refund at the end of the year – and that’s always a nice surprise. But just to hedge your bet, make sure you schedule an appointment with your tax expert.

Now that you know some of the tax deductions your business could qualify for, it’s time to start managing common business risks. Small business insurance can help protect you against the financial impact of a claim or a lawsuit.

And to learn what it takes to turn a side hustle into a small business, watch these videos of our customers as they describe their journey from side gig to full-time entrepreneur: Josh Crandal, Angela Yungk, and Claire Zovko.


Protect Your Business

Protect the business you’ve worked so hard to build. Get a fast, free quote and your business could be covered today.

Get a Quote
Get a Quote
Subscribe to our newsletter

Related Articles

5 Min Read
successful business partnership. Wooden blocks with people icon on blue background.

A 7-point checklist for a successful business partnership 

Tools & Templates | Management

What makes a successful business partnership? Here are 7 things to consider when starting a partnership business. Read More

5 Min Read
Scissors cutting a dollar bill. Business expenses and budget.

10 Cost-cutting ideas to reduce business expenses now

Finances | Management

The key to business growth requires the right balance between increasing sales and cutting unnecessary costs. Here are 10 tactics to help you reduce business expenses now. Read More

4 Min Read
Brown package with strong. Red mouse on top of it. Last-minute holiday sales for small businesses.

5 Tips for last-minute holiday sales

Finances | Marketing

It’s important to pull out all the stops to get those year-end sales in. Try a few of these sales ideas and see if you can boost your sales before the new year. Read More


We’re here to help.
We provide tailored insurance for the specific risks you face, so you can take the right risks to grow your business.
Get a Quote
Get a Quote
Blog, Footer2021
  • What We Cover
    • Business Insurance
    • General Liability Insurance
    • Professional Liability Insurance
    • Errors and Omissions
    • Cyber Security Insurance
    • Workers Compensation
    • Other Coverage
  • Who We Cover
    • Small Business Owners
    • LLC
    • Side Hustle
    • Contractors
    • Home Businesses
    • 180+ Professions
  • For Our Customers
    • Refer a Friend Program
    • Covid-19 Response
    • Claims Center
  • For Business Owners
    • Save with our Partners
    • Hiscox Podcast for Business
  • About Hiscox
    • About Us
    • Careers
    • Contact Us
    • Hiscox Corporate
    • Investors
    • Foundation
    • Newsroom
    • We Stand Together
    • Affiliate Partner Program
Blog, Footer, 2nd Row (new)
  • Accessibility
  • Site Map
  • Privacy Policy
  • Terms of Use
  • Legal Notices
  • Español

Feefo Reviews: Hiscox rated 4.8/5 with 2,032 reviews between January 31, 2020 - January 21, 2021

© 2021 Hiscox Inc. All rights reserved. Underwritten by Hiscox Insurance Company Inc., 104 South Michigan Avenue, Suite 600, Chicago, IL 60603. As of December 31, 2019, HICI had admitted assets of $778,266,779 and policyholders surplus of $215,333,986. Total liabilities were $562,932,793 (inclusive of $236,274,591 of loss reserves) and paid up capital stock was $4,242,000.

icon-facebook
icon-youtube
icon-twitter
icon-linkedin