The IRS allows self employed workers to deduct many expenses related to their work, including housing, travel and health insurance. If itemized thoroughly, these deductions can add up to a larger tax return than expected from the government. By practicing a few of our simple self employment tax deduction tricks, business owners and freelancers will be rewarded with a return they can invest for their future.
Self Employment Tax Deductions Add Up Quick
Tax return preparation is key, because many aspects of the work life of a self employed individual is eligible for deductions, such as their business, automobile or educational expenses.
Whether it is rented or owned, the cost of a regular workspace can be deducted.
Related expenses, such as property taxes, utilities and homeowners insurance, may be deducted, too. The size of this deduction corresponds to the size of a home office. For example, if a home office occupies 20 percent of the space in a house, then 20 percent of some bills will be eligible for a deduction.
Business trips are another tax deductible expense. But, it’s not just transportation to and from a destination that is tax deductible. Keep receipts from car rentals, taxis, hotels and meals to enjoy more savings. While on a business trip, 100 percent of travel expenses may be written off, but only 50 percent of meals and entertainment can be deducted.
It’s possible to write off any educational expenses incurred to maintain or improve the skills for an existing business.
- Subscriptions to trade or professional publications
Phone, Faxes and Internet
The cost of business phones, faxes and Internet connections are deductible as well.
Self employed workers who entertain clients can deduct 50 percent of their expenses as long as the business activity meets several criteria, including that there was business conducted during, before or after the meeting.
Business travel, such as to and from meetings, is a deductible expense. To maximize tax write offs, self employed workers benefit from maintaining excellent travel logs.
- Repairs and maintenance
- Garage rent
Social Security Taxes
The self employed are legally obligated to pick up the second half of Medicare and Social Security taxes that an employer ordinarily pays. But, it’s possible to get some of that money back by deducting half of the self employment tax from their net income as a business expense.
Health Insurance Premiums
Health insurance premiums are a deductible expense for self employed workers.
- Qualified long-term care insurance
The IRS also allows a deduction for premiums paid to private coverage for spouses and dependents under the age of 27.
With tax day quickly approaching, it’s possible to receive a larger than expected return by taking advantage of self employment tax deductions. Just don’t forget to keep the receipts!