During these days we all want both flexibility and convenience. We also would like to be our own boss. This is why we have seen a steady increase in the number of self-employed individuals in the U.S. This is especially true among young millennials who want to be in charge of their own career path. (Ft. Worth Business Advisor: Tax Deductions for Self-Employed)
When thinking about the advantages of becoming self-employed, our tax situation is usually not high on the list. It’s not a very exciting idea to think of having to pay taxes when tax time comes. However, people are willing to deal with it so they can be their own boss.
Additionally, there are tons of deductions out there for self-employed individuals that you need to know when tax season comes. If you take advantage of all the deductions that apply to you, you could end up saving big.
Funding your Transition
If you are just starting out in building your own self-employed contract work or home business, then you might not be sure how to go about funding the transition out of full-time employment. Different people rely on a variety of sources. From saving up enough to go without income for a time, to loans, all the way to receiving help from family. However you fund your transition, know that the expenses you put towards building your business or contract work can be deducted!
Big Deductions You Might Not Be Aware of
Here are big deductions to keep in mind:
- A Portion of your Home
Working from home or using part of your home for your business can qualify you to get a deduction. To do this you need to calculate the percentage of square footage you use ‘exclusively and regularly’ for business-related activities.
- Health Insurance
You could possibly get deductions on your health insurance premiums if you bought the policies you have on your own. This can apply to premiums for yourself, your spouse, and your dependents. This would be an adjustment to income rather than an itemized deduction.
If you need further schooling, specialized classes, or other kind of education to run your business or continue succeeding in your self-employment status, then you can deduct those expenses. These expenses for ‘qualifying work-related education’ can include costs for tuition, supplies, books, digital programs, transportation to and from classes, etc.
- Your Transportation Costs
If you need to regularly use your vehicle for work purposes, then you are allowed to deduct one dollar for every two miles you drive! Therefore, it’s important to keep track of your miles.
- Retirement Savings
You don’t have to miss out on all the great retirement savings just because you are not traditionally employed. You can get a solo 401(k) and all your contributions up to $56,000 can be deducted in your tax filing.
Call Scott A. Kunkel, CPA PC today in North Richland Hills at 817-498-1040 to have a chat about ways to save money on your taxes.
(Ft. Worth Business Advisor: Tax Deductions for Self-Employed)
Source: Augusta Free Press