The types of tax deductions you’re able to claim as a welder vary depending if you work for someone else or are self-employed. Sometimes, you may find yourself earning income from working both a day job and side projects. These side jobs might be considered self-employment income, allowing you to take more deductions on your federal tax returns. Some deductions that welders can deduct, like work clothing, are trickier to claim. However, most business deductions that welders claim are rather clear cut, as long as they’re reasonable, necessary and commonly used for the profession.
Knowing your Employment Status
Being certain of your employment status is the first step in finding which tax deductions for welders you’re able to claim. At times, the lines between the different employment statuses can get blurred, but the IRS has specific rules or tests in place to define someone who is an employee rather than an independent contractor, or self-employed. Independent contractors and freelance welders often perform the same jobs as someone who is an employee – even for the same company – but for tax purposes, the two are very different statuses.
Employees have Social Security and Medicare taxes withheld from their paychecks, and will receive a W-2 from their employees, whereas independent contractors have neither. Since no taxes are withheld from an independent contractor’s pay, he has to take care of them on his own. At tax time, independent contractors typically receive a Form 1099-MISC, Miscellaneous Income, from anyone paying them more than $600 for work.
Schedule A Deductions
While independent contractors may or may not not receive a 1099-MISC from a payer, employees should definitely expect a W-2 before tax time from their employer. One of the distinctions between self-employed contractors and employees is the way they claim tax deductions. Employees are not able to take as many deductions as independent contractors because they’re not responsible for all of the daily operational costs of conducting business. Employee welders who itemize can take their deductions on Form Schedule A, "Itemized Deductions."
Here are a few Schedule A tax deductions for welders:
- Union, licensing, regulatory, occupational and trade associations fees
- Liability insurance costs
- Uniform upkeep and the cost of any gear or clothing that cannot be worn outside the course of work. These can include hard hats, steel-toed work boots, welding goggles and similar gear you wouldn't wear in a non-working environment.
- Tools or equipment replaceable within a year.
- Continuing education and job hunting expenses while unemployed and looking for work in the same field.
These qualifying expenses you incur that are not covered by your company can generally be written off, but it’s best to familiarize yourself with the IRS’ website or consult with a tax preparer for exact deductions you can take.
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Schedule C Deductions for the Self-Employed
Self-employed welders can take all of the deductions listed above and more. However, they must do so on Schedule C, "Profit or Loss from Business." This is where independent contractors claim business expenses that employees cannot. Even if you don’t receive a 1099 from a particular job, you still must keep track of all earnings and expenses. In the event Uncle Sam takes a closer look at your tax return, you’ll be able to easily provide proof of your expenses with good recordkeeping.
The following are several tax deductions self-employed welders can claim:
- Advertising and marketing
- Work-related travel expenses associated with having to be away from home for more than a day
- Cost of tools and equipment plus maintenance
- Qualifying vehicle costs and expenses
- Renting and leasing office, warehouse or storage space needed and used for work
- Employee salaries or bonus compensation and commissions
These deductions will go towards lowering your tax obligation by reducing the amount of income on which you’re taxed. It’s a good idea to speak with a tax adviser to be certain you’re taking advantage of all the deductions at your disposal.
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