The short answer: Home office, vehicle and equipment deductions are often the biggest ones for self-employed people, and the most likely to be questioned. Keep a little proof for each: how you use the space, a mileage log, and invoices with dates. Hold on to it for as long as the IRS can look back.
Home office
To deduct a home office, the space generally must be used regularly and exclusively for your business, and be your principal place of business or where you meet clients. A desk in the corner of the family room that also serves as a play area usually does not pass the “exclusive” test. A spare room used only for work usually does.
Keep:
- The square footage of the office and of your whole home
- A simple photo or sketch of the space, with a date
- Rent or mortgage interest, utilities, insurance and repair records for the home, if you use the regular method
The IRS also offers a simplified method that multiplies a set rate by the square feet of your office, up to a limit, and needs fewer records. We can compare both for your situation.
Vehicle
Business driving is deductible. Your drive from home to a regular workplace is commuting and is not. You can generally deduct either actual costs or the standard mileage rate, which the IRS sets each year.
The most important record is a mileage log written at or near the time of the trip. For each trip, write down:
- The date
- Where you went
- Why you went (the business reason)
- The miles driven
Also note your odometer reading at the start and end of the year. If you use actual costs, keep gas, repair, insurance and registration receipts. If you use the car for both business and personal driving, you deduct only the business share, and the log is how you prove it.
Equipment and big purchases
Computers, tools, furniture, machinery and similar things are often deducted over time, though special rules can let you deduct more up front. Which rule fits depends on the item and the year, so do not decide at the register.
For each item, keep:
- The invoice or receipt showing the date, the seller and the price
- The date you started using it for the business
- A note on what percent is business use, if it is mixed
- Later on, a record of what you did with it if you sell or retire it
Small purchases may be handled more simply, but you still need the receipt.
| Home office | Vehicle | Equipment |
|---|---|---|
| Space measurements, a photo or sketch, and home expense records where applicable. | A timely mileage log, odometer readings, and expense records for the chosen method. | Invoices, business-use dates, business-use share, and later sale or retirement records. |
How long to keep everything
In general, keep tax records for at least three years from the date you file the return that uses them. Some situations call for longer, and records for property should be kept until the period of limitations ends for the year you dispose of the item. When in doubt, keep it longer. Digital copies are fine, as long as they are readable.
Make it a habit, not a project
Keep one folder per year and three subfolders: home office, vehicle and equipment. Drop in a photo of each receipt or invoice the day you get it. Update the mileage log at the end of each work day, even if it takes only a minute. At the end of the year, you will have most of what we need already in one place, and you will not be digging through a glovebox for crumpled slips.
What if I did not keep a log?
Do not panic, and do not make one up after the fact. Tell us what you do have: calendar entries, client invoices, map history, fuel receipts. Sometimes records like these can help rebuild a reasonable picture. Starting a proper log today means next year will be much easier.
Common slip-ups
- Writing the mileage log months later from memory
- Counting the commute as business miles
- Deducting a room that also serves as a guest bedroom
- Losing the purchase date on equipment
- Throwing away records the moment the return is filed
Your next step
Not sure your records are enough? Request your tax organizer and tell us which of these deductions you use. We will let you know what to gather. More on what we prepare is on our self-employed page and the Business & Self-Employed overview.