Virtual Assistant Taxes in Tennessee - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Essentials for a Virtual Assistant in Tennessee

The Volunteer State’s growing entrepreneurial spirit makes Tennessee an ideal location for virtual assistants, offering a blend of business-friendly policies and a lower cost of living. However, navigating the tax landscape as a self-employed professional requires careful attention.

As a virtual assistant, earnings are considered self-employment income, meaning the Internal Revenue Service (IRS) requires reporting all income and expenses on Schedule C (Profit or Loss from Business) with Form 1040. Crucially, this also triggers the obligation to pay self-employment tax, covering both Social Security and Medicare contributions, on net earnings exceeding $400.

How Tennessee Handles Gig Worker Taxes

Tennessee stands out as one of the few states with no state income tax. This means virtual assistants operating within Tennessee do not file a state income tax return. However, this does not exempt individuals from federal tax obligations. The federal government still requires income reporting and tax payment, regardless of state residency. Many Tennessee-based VAs find themselves in a unique position, potentially having a lower overall tax burden than their counterparts in states with income taxes, but still needing diligent record-keeping for federal compliance. It’s important to remember that while Tennessee doesn’t tax income, other federal taxes, like self-employment tax, still apply. Furthermore, while Tennessee doesn’t have a traditional income tax, it does impose a Hall income tax on interest and dividend income, though this is being phased out. This is unlikely to directly impact most virtual assistants, but highlights the state’s unique tax structure. Staying informed about any potential changes to Tennessee’s tax laws is crucial for long-term financial planning. For more information on Tennessee taxes and business resources, visit the Tennessee Department of Revenue.

Key Tax Deductions for Home-Based Virtual Assistants

• Home Office Deduction: The home office deduction allows for the deduction of expenses related to the portion of a home exclusively and regularly used for business. “Exclusive use” means that space is only used for work; a dining room table used for both meals and client calls does not qualify. “Regular use” means consistent and frequent use for business activities. Taxpayers can choose between the simplified method ($5 per square foot, up to 300 square feet) or the actual expense method (calculating a percentage of mortgage interest, rent, utilities, etc., based on the square footage used for business).
• Hardware & Software: The cost of essential hardware, such as computers, webcams, and printers, is generally deductible. Software subscriptions vital to the business, including programs like Adobe Creative Cloud, project management tools, and website hosting fees, are also deductible expenses.
• Internet & Phone Bill: Only the portion of internet and phone bills used for business purposes is deductible. Carefully track business usage to determine the deductible percentage. For example, if 75% of internet usage is for client work, 75% of the bill can be claimed as a deduction.

Note on Mileage: As a home-based worker, mileage deductions are less common. However, any travel directly related to business – such as occasional client meetings, attending industry events, or making necessary business purchases – can be claimed using the standard mileage rate or actual expenses.

The 15.3% Self-Employment Tax Explained

The 15.3% self-employment tax is comprised of two components: 12.4% for Social Security and 2.9% for Medicare. This tax is essentially the equivalent of the employer and employee portions of these taxes when working for a traditional employer. It’s calculated on net earnings (income minus business expenses) exceeding $400.