No one likes taxes, but they can be even more frustrating when you are self-employed. Nevertheless, while dealing with stacks of receipts, payments, and tax forms are frustrating, finding new deductions to reduce your burden is always enjoyable. Everyone loves saving money. Individuals who are self-employed have many potential reductions available to them. Unfortunately, many deductions are commonly missed.
1. Startup Costs – For those in their first year of business, any costs accumulated before starting operations are deductible. However, if it is over $5,000, it will need to be amortized over time.
2. Health Insurance Premiums – As a self-employed individual, if you buy your own health care insurance, you can deduct the total cost of the coverage for your and your family.
3. Self-Employment Taxes – Since you are both your own employer and employee, 50 percent of the Medicare and Social Security you pay can be deducted on your personal IRS Form 1040 utilizing form Schedule SE.
4. Retirement Plans – One of the most beneficial deductions for the self-employed individuals are contributions made to 401 (k) plans and IRAs. For 2017, 401(k) contributions up to $18,00 (or $24,000 if you are over 50 or over) plus 25% of compensation. But, the total contributions cannot exceed $54,000.
5. Home-Office Deductions – If you are using a part of your home “regularly and exclusively” for your business, you may be able to subsidize part of your home utilities and insurance costs. You may also be able to every write-off part of your rent or depreciate your home.
Today’s article shared 5 commonly missed tax breaks for the self-employed. Do you need more information? If you would like to talk about tax breaks for the self-employed, or a related topic, please contact us.