Tax Deductions for the Self-Employed
Being self-employed can be a great experience with a number of benefits. Setting your own hours, not having to answer to anyone and determining your own income are just a few things that can make being self-employed worthwhile. Unfortunately, self-employment is often a double-edged sword, as taxes can become quite problematic if they are handled incorrectly. As a result, it is important to learn about the many tax deductions that are available for those who are self-employed. The more you understand about tax deductions, the better your chances of being able to build a successful business and stay afloat.
Home Office Deductions
Many people who are self-employed work out of their homes and are unaware of the fact that they can actually get a deduction on their taxes because of this. Home office deductions are rather open-ended and relate to the area in your home that you use as a workspace. If you have a specific part of the home that is used only for work, you can include this in your deductions. Unfortunately, however, the deduction applies to areas that are used only for work. This means that if you try to claim your family room as a home office and the computer area is used by others for work or play, your deduction is no longer valid. As a result, many people believe that claiming home office deductions can increase the chances of getting audited, although this has not been proven.
Office Supplies & Furniture
Paying for furniture or office supplies that are used only for work can get rather expensive quite quickly, and there’s no reason why you shouldn’t be able to write these expenses off as deductions. As with the home office deduction, however, you need to ensure that these items are used specifically for work and professional purposes only, and are not shared with others for leisure. If you fall into the former category, you should be able to get a nice deduction, especially if purchasing supplies and furniture is something you have to do on a frequent basis given the nature of your business.
Health Insurance Premiums
One of the worst parts of being self-employed is that you need to pay for your own health insurance premiums. Since these premiums can be exorbitant in price, keeping up on payments can be extremely difficult. Fortunately, health insurance premiums can usually be deducted when it comes time to do your taxes. Technically, this would be considered a personal deduction rather than a business deduction. The fact is, however, this specific deduction is available only to those that are self-employed, making it more than worth taking if you have the opportunity.
Meals and Entertainment
If travelling and taking clients out for meals or entertainment is a large part of your business plan, you need to know that you can often claim these expenses as deductions. Because meals and entertainment can often get expensive, you should try to keep them to a minimum, even if you plan to claim them. The less you have to claim with the IRS, the better your chances of it working in your favor.
