Business Expenses Made Simple

Sam pushed a pile of receipts across the desk. Some were in a Ziploc bag. One was a crumpled gas station receipt that had been through the wash.

“I kept everything I thought I might need,” he said. “But I’m not sure what counts.”

The preparer spread them out. Fuel receipts. A dump fee receipt from the county transfer station. A receipt for a replacement trailer hitch. A Facebook receipt for $45 in advertising. A receipt for work gloves and garbage bags. A printout showing his phone bill.

“Most of this counts,” she said. “Let’s go through it one category at a time.”

Business expenses are where the return gets interesting for gig workers. Every legitimate business expense reduces net profit, and net profit is what both income tax and self-employment tax are calculated on. A dollar of deductible expense saves a gig worker more than a dollar saved anywhere else. Helping your client find every legitimate deduction is one of the most valuable things you can do in this appointment.

The IRS allows deductions for expenses that are ordinary and necessary for the business. Ordinary means it’s a common expense for someone in that line of work. Necessary means it’s helpful and appropriate for the business. These two words cover almost everything a legitimate gig worker spends money on to operate.

An expense doesn’t have to be essential. It doesn’t have to be large. It just has to be ordinary and necessary for that type of business. For a junk removal operator, dump fees are ordinary and necessary. For an Uber driver, car washes might be ordinary and necessary. For a house cleaner, cleaning supplies are ordinary and necessary.

Mileage. For most service-based gig workers, mileage is the single largest deduction. The IRS standard mileage rate for 2025 is 70 cents per mile for business miles driven. Sam drives his truck to every job, to the dump, to pick up supplies. Every business mile is deductible. A client who drives 15,000 business miles at 70 cents each has a $10,500 deduction before touching anything else.

The catch: mileage must be documented. The IRS expects a mileage log — date, destination, business purpose, and miles. Apps like MileIQ, Everlance, or even a simple notepad do the job. Clients who don’t have a log often have to reconstruct mileage from memory or from job records. We cover this in Lesson 6.

Fuel. If the client tracks actual vehicle expenses instead of using the standard mileage rate, fuel is deductible as part of the actual expense method. Note: a client must choose one method or the other — not both. The standard mileage rate is usually simpler and often produces a larger deduction for service workers with older, less fuel-efficient trucks.

Dump Fees and Disposal Costs. For junk removal, this is often the second biggest deduction after mileage. County transfer stations, private disposal, dumpster rental — all deductible. Keep every receipt.

Equipment and Tools. Work gloves, garbage bags, straps, moving blankets, dollies, pressure washer supplies, lawn equipment — anything purchased specifically for the business. Large equipment may need to be depreciated over time rather than deducted immediately, but for basic supplies and smaller items, the cost is deductible in the year purchased.

Vehicle Repairs and Maintenance. If the vehicle is used for business, repairs and maintenance are deductible to the extent of business use. Sam’s trailer hitch replacement is deductible if the trailer is used for junk removal. Keep the receipt and note the business purpose.

Advertising. Facebook ads, Google ads, business cards, yard signs, door hangers, website hosting, Google Business Profile premium features. All deductible. Sam spent $45 on Facebook advertising — that’s a business expense.

Cell Phone. Most gig workers use their personal cell phone for business — taking calls from clients, using navigation, managing the Cash App, communicating with customers. The business-use percentage of the phone bill is deductible. A client who uses their phone 70% for business can deduct 70% of their monthly bill.

Business Insurance. General liability insurance for a service business, commercial auto insurance for a vehicle used for work — deductible.

Platform Fees. Uber, DoorDash, and similar platforms take a percentage of earnings before passing the rest to the driver. Those fees are deductible as commissions or service charges on Schedule C. This is why 1099-K income (gross receipts) needs the platform fees subtracted as an expense.

If a gig worker uses part of their home exclusively and regularly for business — a dedicated office space, not a corner of the kitchen table — they may qualify for the home office deduction. The simplified method allows $5 per square foot of dedicated office space up to 300 square feet ($1,500 maximum).

For mobile gig workers like Sam who primarily work in the field, the home office is a smaller consideration. For workers who manage their business primarily from home — an online seller, a bookkeeper, a consultant — it can be significant. We introduce it here but recommend the advanced modules for full coverage of home office rules.