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mweiss0706
Returning Member

Self Employment Tax Deductible Business Expenses

I have taken a contracted employment position and will get paid for completing a specific task.  I was required to complete several hours of training without compensation before being assigned work. In addition, I spent time researching this work and setting up business processes for this self-employment work. Can I deduct my time spent in training, researching and setting up business processes as a business start-up cost?  If so, how to do I value my time? 

Also, once assigned work, I am required to participate in one hour of training every month and have the option to participate in additional trainings/meetings each month.  Since this time is in addition to the work I'm contracted to perform, is my time spent in these training/meetings a deductible business expense?  If so, how would I value this time?

 

6 Replies
Carl
Level 15

Self Employment Tax Deductible Business Expenses

Can I deduct my time spent in training,.....

No. You flat out can not deduct from your taxable income, that which you were never paid and were never assessed taxes on in the first place.

 

mweiss0706
Returning Member

Self Employment Tax Deductible Business Expenses

I will be paid once I complete work beginning in June and will have earned business income.  My question is about end of you tax reporting.  Is my time spent in the start-up activities I described a tax deductible start-up cost, and if so, how do I value my time.  And is my time spent in required training/meetings after I begin earning income a tax deductible business expense?  I know my time in completing the contracted work is not deductible.

 

VolvoGirl
Level 15

Self Employment Tax Deductible Business Expenses

No.  As answered before you CAN NOT deduct your time or labor.  That would be like paying yourself.  

 

Sole proprietors cannot take a withdrawal or salary and include it as an expense on their tax return. As a sole proprietor, you are not an employee of the business. You don't pay yourself or enter a salary or withdrawal for yourself. All the business income and expenses are your personal income and expenses in the first place. You just fill out a Schedule C. The net profit or loss is your income. If you have a net profit of $400 or more on schedule C you will pay SE self employment tax on it in addition to your regular income tax. It's all included on your personal 1040 form.

 

(And if you paid yourself and deducted it as an expense then you would have to include it as income on the same tax return so it would be a wash.)

 

See Schedule C instructions page C-10 Line 26
Do not include salaries and wages deducted elsewhere on your return or
amounts paid to yourself.
https://www.irs.gov/pub/irs-pdf/i1040sc.pdf

 

Carl
Level 15

Self Employment Tax Deductible Business Expenses

Is my time spent in the start-up activities I described a tax deductible start-up cost

To reiterate in another way, since your time is not and can not be taxed, it has no tax value. Not a single penny. You can not deduct from taxable income, that which you were never paid and never assessed taxes on, and never paid taxes on. Only the money you are paid is taxable income, and only the money you paid to start your business, before your business was actually and officially "open for business" can be claimed as start up costs.

 

mweiss0706
Returning Member

Self Employment Tax Deductible Business Expenses

Thanks so much for your explanation.

 

mweiss0706
Returning Member

Self Employment Tax Deductible Business Expenses

Thanks so much for clarifying.

 

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