Common Tax Deductions Available for Self-Employed Individuals
Self-employed individuals have a lot of flexibility in their day-to-day lives, but that flexibility also brings some different rules regarding taxes. Earnings on self-employment income are not taxed upfront like they are for people who receive a W-2 for their income. This requires individuals to plan their income accordingly since they typically have to pay more taxes either quarterly or annually. Self-employed people can experience some tax relief by looking at the tax deductions list and reducing their liability by deducting certain expenses. These are the common tax deductions self-employed individuals should not overlook.
Your cell phone or home phone can be deducted as part of your business. However, you need to be able to prove that the usage is for business purposes. Mixing business with your personal life can be problematic and too many deductions could raise red flags for a potential tax audit. If you use your phones for both business and personal use, keep records of how often you use them for each and you can deduct just the portion used for business from your taxes.
Vehicle Or Travel Expenses
Any travel expenses incurred directly for your business can be deducted. And 50% of expenses from meals and entertainment can be deducted as well. If you drive your vehicle for business, the gas, repairs, maintenance, toll bills and other expenses can be considered tax deductions. But like with the phones, it’s important to distinguish and keep accurate records of how often the vehicle is used for business purposes versus personal purposes.
Home Office Space And Office Supplies
When you have a home office space dedicated to your business, you can deduct some of your household expenses needed to run your business. This can include the internet, electricity and even the exact square footage of the room. Office supplies are also on the tax deductions list, including computers, printers, software, pens, paper and more. And if you have to pay any monthly or annual fees for subscriptions or memberships related to your business, don’t forget to deduct them also.
A big tax deduction self-employed individuals can take advantage of is health insurance premiums. As long as you aren’t eligible for a health plan through your spouse’s employer, you should qualify to be able to write-off any health insurance premiums you pay. With the high cost of health insurance today, it’s worth looking into whether you can deduct the premiums paid.
Rocket Tax Relief can help you identify every possible tax deduction you qualify for. Being self-employed is a great accomplishment, but it also means you may not have the time to do things like search through the tax deductions list to see what qualifies as a deduction. When you contact us, we will work with you to fully understand your story and your business and take the appropriate measures to ensure you get as much tax relief as possible through deductions.