Deductions & credits

You have a lot of great questions. I'm going to refer you to the Gig Economy Tax Center that the IRS has. This is going to answer all your questions in more depth than I do here.

1) Deductible Miles

You are asking about the difference between business miles and commuting miles. Normally driving from your home to your first work location is considered commuting. In your case, you have no regular place of work, so driving from home to your first pick up would be considered business miles. Then all your miles driven between pick ups and drop offs would be business as well.  

2) Other Vehicle

You can deduct a standard mileage rate or actual expenses when calculating your business use of vehicle deduction. If you are using the standard mileage rate, you do not keep track of gas, car washes, maintenance and repairs because you are getting a specific amount per mile. If you use the actual expense method, you would keep track of and receipts for all of those things. At the end of the year, you calculate the percentage of business use based on total miles for the year and then you are able to deduct that percentage of your actual expenses. This is just a high level overview. There are many details to consider, like you can't switch back and forth each year between standard and actual. 

   C) Gas station food or fast food between gigs? - No, this is not deductible. 

3) Other Necessities   

A) Phone bill?  -  If you use your personal phone for business purposes, you would need to determine a reasonable percentage of business use of your phone. So for example, if you use your phone 25% for business and 75% for personal, you would be able to deduct 25% of your phone bill as business use.

   B) New phone if needed? - Same as above.

   C) Auto insurance? - This depends on if you use the standard mileage rate or actual expenses. A portion of the standard mileage rate is for insurance, but if using the actual method you would include your auto insurance and it would be calculated into your deduction.

   D) Health insurance?  - If you pay for health insurance out of pocket, you could potentially qualify for the Self-Employed Health Insurance Adjustment to Income.

   E) Medical bills?  - No, not as a business expense. If  you itemize your deductions on your tax return, you can include qualified medical expenses that are above and beyond 7.5% of your adjusted gross income.

   F) Clothing?  - No. To deduct clothing related to self-employment the clothing has to be distinctive, meaning if you wore the clothing out in public people would be able to distinguish what you do for a living. For example, a police officer or fire fighter.

Random Questions

4) Do I need to keep receipts for everything relevant to tax deductions and / or expenses?  - Yes! You must be able to substantiation any deduction you take.

5) Will bank statements and a spreadsheet work instead of keeping hundreds of receipts? - No, not instead of. Bank statements are not the same as an itemized receipt. Along with keeping your receipts, a spreadsheet is a great way to keep track of your expenses. You could also use an accounting software to track income and expenses to make this more manageable. 

6) How do I keep track of and verify miles in case of an audit? - A mileage log is very important. You will need to track all your mileage. There is great information on this on the Gig Economy Tax Center link I provided above.

7) How do I make quarterly tax payments? This is also addressed in detail on the Gig Economy Tax Center.

9) What % do I need to set aside for federal and state of Wisconsin taxes in 2025? I generally advise for you to set aside a minimum of 20% for taxes.

10) Do I still get the standard deduction if I am an independent contractor? Yes. You can choose between the standard deduction or itemized deductions depending on which is best for you. This is not effected by self-employment.