Tax breaks can be a boon to the self-employed. If you own your own business — or are thinking about it — here are some tax deductions you may be eligible to claim.
Self-employment (SE) tax. When you’re self-employed, you have to pay SE taxes on your earnings instead of the Social Security and Medicare taxes that employees and employers pay. You’ll be able to deduct a portion of your SE taxes.
Health insurance. If you’re not eligible for coverage under a plan offered by your spouse’s employer, you can deduct the costs of health, dental, and long-term care insurance premiums paid for yourself, your spouse, and your dependent children. (Requirements apply.)
Office at home. You can deduct a percentage (usually based on square footage) of your mortgage or rent, utilities, property taxes, homeowners insurance, and home maintenance costs. Alternatively, you may use the “safe harbor” method, which allows a deduction of $5 per square foot (up to 300 square feet). But be careful — you must use the space regularly and exclusively for business to claim the deduction.
Thinking about retirement. Deductions for contributions to a tax-deferred retirement plan, such as a SEP-IRA, SIMPLE IRA, Keogh plan, or solo 401(k) plan, will reduce your current tax bill.
Talk and surf. You can deduct phone, fax, and Internet expenses directly related to your business.
Vehicle use. The cost of driving a car for business is deductible. You can use either the IRS standard mileage rate or your actual expenses to compute your deduction.
Interest. Interest on business loans and business purchases charged to a credit card are deductible.
Food, fun, and travel. You can generally deduct 50% of the cost of business meals and entertainment if you meet certain tax law requirements. Other business travel expenses, such as lodging, are 100% deductible.
Make sure you keep good records and Contact Us today if you have any questions.