Do you earn any money outside of your “regular” job? If yes, you most likely have some associated expenses that qualify as tax deductions. This is true whether your source of income is a business that you spend every evening and weekend pouring your soul into, or if it’s just doing an online survey or freelance medical writing job from time to time.
If any of the following are the case for you, you may be able deduct expenses related to the business activity:
- You have an LLC
- You are a sole proprietor
- You work as an independent contractor
- You received a 1099-MISC
Business owner and physician independent contractor tax deductions
Here are 10 types of tax deductions that your situation may qualify for.
Disclaimer: I’m not an accountant. The information below is based on my own research and interpretation of IRS language. You should consult with an accountant regarding your own taxes.
1. Startup costs
Costs of getting a business up and running are deductible – even if you haven’t sold a single product or made a profit yet.
Common startup expenses include:
- Business filing fees
- Lawyer fees for business formation and incorporation services
- Equipment and supplies
- Licenses and permits
- Market research
2. Education and training
Qualifying, work-related education can be deducted, as long as it serves a business purpose and it maintains or improves the skills needed in your present work. However, education can’t be deducted if it’s part of a program of study that will qualify you for a new trade or business. Simply put, it needs to assist you in remaining competent at the work you already do. This is fairly nuanced, so you may want to read the details straight from the IRS.
For physicians, some examples of what may be deductible include continuing medical education, leadership courses, BLS/ACLS classes, and online courses to help you run your business.
3. Hired help
You might be reluctant to hire an assistant. It can be difficult to justify the expense when you know you’re fully capable of doing certain tasks yourself. But there are many benefits to having an assistant or contracting out certain aspects of your side gig – and deducting the expense is one of them.
The cost of each of these types of help is likely to qualify as a deductible business expense:
- A virtual assistant
- A freelancer hired on Upwork or other online platform
- An employee for your business
4. Business travel
The costs of travel that you do for business purposes is deductible. These expenses include ground transportation and airfare, lodging, various fees and charges (such as baggage fees), most tips, and 50% of meals. You should always make sure the business purpose of the travel is clear and is planned in advance of the trip.
Qualifying business travel might include:
- Attending a medical or other professional conference
- Going out of town to meet with a client
- Doing a site visit
- Traveling around a geographic area doing sales calls
5. Office space, supplies, and equipment
Even if all that your side gig entails is occasional expert knowledge consults, you should have your own equipment for the job. Don’t do side gig work at the office of your “day job” and don’t do it on the laptop provided by your employer. Any supplies and office space you have for your business or side gig can be deducted, such as:
- Expenses related to space in your home that’s dedicated to your business
- Computers and other electronics
- Phone and internet (or the portions of them used for business purposes)
- Miscellaneous office supplies
It’s perfectly legitimate to take a home office deduction if you dedicate an office in your home to a side gig. Just be honest about the size of the space used and the percentage of cell phone, internet, and other services that are used for business purposes.
6. Marketing and advertising
If the success of your side gig depends on getting customers or clients, you probably need to spend money marketing your business and advertising your services. There’s no need to pay taxes on the expenses associated with this. This can include:
- Costs of developing and running a website
- Print ads
- Social media ad campaigns
- Promotional products and sponsorships
- Brochures and business cards
- Market research and product planning
7. Licenses and certification
This is a big one for physicians. Medical licensing and certification costs can really add up, especially if you need multiple state licenses or have more than one board certification.
This category includes:
- State license fees for initial licensing and renewals
- Fingerprinting fees
- Notary fees
- Maintenance of certification and board exam fees
- NPDB and other query fees
- Costs to have transcripts and verifications sent
As long as these are necessary costs to effectively run your side gig, they are business expenses that can be deducted from your taxable income. Physicians doing telemedicine will benefit a lot from this category.
Some of you will already have these costs paid for or reimbursed in full by your main employer, which is even better. For others, though, simply not having to pay taxes on these expenses can really add up.
8. Memberships, subscriptions, and dues
Being a member of an association, society, or other organization related to your side gig is a huge help when it comes to networking and making a name for yourself. But it can be expensive. Thankfully, dues and memberships are tax deductible business expenses.
Similarly, subscriptions to trade publications, relevant journals, and online communities also qualify, as long as they’re needed to help you do your side gig.
9. Professional services
Running a business – even if it’s a one-man show – has a lot of moving parts. This is especially true in the highly regulated field of healthcare. Chances are you’ll need the services of other professionals at some point to offer advice or assist you with various needs.
In many cases, these services are deductible:
Finally, if your work requires insurance, it’s a business expense. For those practicing medicine as a side gig, this means medical malpractice insurance. Others may need different types of professional liability insurance such as errors and omissions insurance.
The average doc with a solo side gig will only have one or two expenses annually in this category (or none at all). If you run a business that ends up hiring employees, though, this bucket of expenses becomes a lot more extensive.
Your side hustles are business activities. Even if you don’t have a business registered with the state, treat them as businesses. When tax time rolls around, you’re likely to have some substantial tax savings.