Self-employed business owners enjoy the benefit of deducting the bulk of the business costs to be used for tax purposes. The ability to enjoy these tax benefits could lower the amount of tax you pay for your business. Tax regulations may change, but you can benefit from self employed tax deductions that are important today.
The Home Office Deduction
The majority of small-business owners have heard about this deduction. However, the stigma surrounding it isn't real. It's no longer a factor that can increase your chance of getting audited. It was the case in the past 25 years when fewer people worked at home. However, IRS modifications to the deduction for home offices a couple of years ago allowed the deduction to be more tax-friendly.
Two requirements must be passed to get the deduction. First, the area must be used solely for office use. It can't be just a desk in your home office or bedroom. It must be a space entirely focused on your company. It should also be your primary location of business. If you own a business outside your home and use your office in your home in the evening or on weekends, it is not eligible for the deduction. It is recommended to utilize the software for tax preparation or seek guidance from a tax professional. This deduction can be complicated, but don't stay away from the deduction in fear of being audited.
Training and Education Expenses
If you have paid for educational expenses related to your job throughout the year, you may be eligible to claim an exemption from your taxes. The amount you pay must be for education that keeps or increases your capabilities within your current line of work. If the training can help you get an entirely new career or business line, it is not classified as deductible. For instance, if you offer home repair services and choose to enroll in education in home repair and take advantage of it as tax-deductible. Since the course is designed to maintain the skills, you already have, it is deemed deductible. If you're eligible, you'll be able to take deductions for tuition, books, equipment, fees, and transport costs, among others.
Internet and Phone Bills Deduction
Self employed tax deductions regardless of whether you are eligible for the deduction for the home office, regardless of whether you claim the home office deduction, you can take the business-related portion of your telephone as well as fax Internet expenses. The trick is only to deduct the costs specifically related to your business.5 As an example, you could claim the internet-related expenses of operating an online presence for your business. If you only have one phone, it is not appropriate to deduct the entire cost of your monthly phone bill, which includes the use for business and personal.
Health Insurance Premiums Deduction
If you're self-employed, you pay the health insurance premiums and do not enroll in a health insurance plan offered by your spouse's employer, then you can deduct all your dental, health, or qualified long-term (LTC) costs. Additionally, you can deduct the premiums you pay to cover your spouse, dependents, as well as your children who were younger than at the time of year's close, even if they're not dependent on your tax return. Calculate your deduction using this worksheet for Self-Employed Health Insurance deduction from IRS Publication 535.
Meals Deduction
A meal is a tax-deductible expense for business when you travel, attend a business event, or host your client. The food you eat should not be expensive in the context and, before in some cases, you were able to take a deduction of 50% of the actual cost if you save the receipts, or 50 percent of your standard allowance for meals if you keep documents of the date the location, time, and motive behind your travel, but not the actual receipts for the meal. Unfortunately, this means the cost of a desk lunch isn't tax-deductible.
Self-Employed Health Insurance Premiums
If you are self-employed, health insurance is expensive, but you might reduce it from your taxes. The amounts you can deduct are health insurance premiums that you paid for yourself and your spouse, dependents as well as any children younger than 27 that are covered by your health insurance plan regardless of whether or not you declare them on your tax return. You must report the net income in the year you are using these self employed tax deductions. You might instead declare the premiums in an itemized deduction your federal tax Form 1040 return Schedule A if you did not.
Conclusion
When your business grows, it will bring a degree of complexity of tax law that you never thought possible. In the future, it will likely be better to engage an expert in tax law to assist. However, it may not be this time if you complete your tax returns and you're not claiming deductions that you have not claimed. If that's the case, consulting the help of a tax professional could be worth the cost.
