The Ultimate Self-Employed Tax Deduction Guide

Being self-employed means more control and responsibility when it comes to your career and income. It also means you need to be responsible for your own taxes. Self-employed taxes may seem like an unsolvable maze, where you end up paying most of what you earn. An accountant will tell you what you need to pay, but they may not tell you how to deduct all the available expenses it takes to be your own boss. This helpful guide outlines the basics of what you need to know about deductions and how to save yourself money when it comes to tax season. Just remember to keep full and accurate records of all possible deductions.

Retirement Plans

Individual Retirement Plans and 401k’s are a great deduction. The IRS allows an individual to deduct up to $18,000 deposited annually into their retirement fund, plus up to 25% of their income. When it comes to employees, there are more opportunities for deductions because the government is actively funding retirement through match funding programs such as SIMPLE (Savings Incentive Match Plan for Employees) IRA and SEP (Simplified Employee Pension) IRA.

Home Office

Most home businesses and self-employed individuals do part or most of their work from home. As a result, there are many deductions associated with having a home office. Remember that the IRS may require documentation that the office is used solely for business and not for personal use. Bills such as the internet, phone lines, mortgage interest, repairs, and utilities are all possible deductions. The IRS may also want the dimensions of your home office and other physical details, so be sure to check the IRS website for details.

Travel Expenses

Use of your personal car for business purposes is deductible. The IRS puts out a standard mileage rate every year, so be sure to check it with each new tax year. Use a log to record the accurate use of the vehicle for work. If you want to claim the actual expenses the car incurs rather than the mileage, you can record and deduct bills such as payments, registration, insurance, repairs, garage rent, licenses, tolls, and depreciation. Train, plane, and bus tickets are also deductible if the travel was for business purposes.

Rent

If you rent a storefront or office for your business, you can claim it as a deduction. However, if you lease the property or make payments toward ownership of the property, the rent is non-deductible. You must be able to prove that this property is for business purposes.

Education

Books, online courses, college classes, and research used to improve the standing of you or your business are tax deductible. This ranges from purchasing e-books to taking seminars on business methods. Furthering your education is a business expense.

Advertising

Any marketing or advertising expenses for the business are good tax deductions. Newspaper or print ads, social media ads, commercials, radio spots, or promotional materials count as advertising. Keep an accurate record of how much you spend on business promotion throughout the year.

Insurance

Any insurance you take out for the business is deductible. That means housing insurance for home businesses, business insurance, car insurance for the company car, event insurance, and many others. If the insurance policy protects part or all of your business, it is applicable to your deductions. Health insurance premiums are not a deduction but are a credit instead.

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