Business owners enjoy a good deal of tax benefits that help them maximize their profits. As a self-employed individual, you too can take advantage of some deductions that the IRS offers. These deductions are meant to help out solopreneurs, freelancers, and individual contractors scale their business, without draining out a major chunk of their Qualified Business Income in paying taxes.
Here are 7 self-employed tax deductions you cannot afford to overlook.
If you use a part of your home as your office, you are eligible to claim home office deductions. Under this, you can get a deduction on your mortgage interest payment, utility expenses, and home insurance premium, pertaining to only the portion that is being used for business purposes. The calculation can be quite tricky, so we recommend seeking professional help, in case the IRS demands a tax audit in the near future.
In case your business operates out of a rented property, you can file a deduction for the rent amount. However, if you are the owner of the property, you cannot claim a rent deduction. And in case your landlord is someone related to you, and you are claiming a deduction on rent paid, the rent amount cannot be something absurdly high—it has to be standardized.
When you’re self-employed and pay for your own health insurance premium, you can claim a deduction, provided that you are not included in your spouse’s health insurance provided by his/her employer. Besides your own premium, you can also claim the premiums paid for your dependents younger than 27 years, and your spouse.
Your cell phone is used for both business and personal purposes, in most cases. You can deduct a certain percentage of your phone bill, depending on your usage. We recommend maintaining a thorough record to avoid any complications in the future. Now to come to your land phone, the first phone is not eligible for any deduction. If you have a second land phone that you use for business purposes only, the expenses are eligible for a tax deduction.
Running a business means traveling to different places, meeting people over lunches and dinners, and having discussions. The money you spend on business-related travels and meals, is eligible for a tax deduction. However, you need to maintain the receipts and the relevant records to be able to file a deduction. For meal expenses, you can claim a 50% deduction, while for travel expenses, you can claim the entire amount. But you have to be extremely cautious in maintaining each and every record. And while filing taxes, make sure you claim only the amount that was spent on a business purpose. The IRS can demand an audit anytime, so it’s better to be on the safe side.
In case you take any courses or classes to improve your skills in your present line of work, you can claim an education deduction while filing taxes. However, the deduction will not be applicable if your course is in a different field.
If you have taken a loan for running your business and you’re paying interest on the amount, the interest is tax-deductible. But if you’re using the funds for both personal and business purposes, then you can get a deduction only on the amount that you’re spending on your business. The same rule applies to credit card interest.
Being self-employed means you have to shoulder the entire responsibility of running your business. And when you’re occupied with a million tasks at hand, handling deductions and taxes is something you should leave to the professionals. This will help you focus on the core part of your business, and give you peace of mind.
At Accountants Now, we help you plan taxes, get the benefit of eligible deductions, legally minimize your tax liability, and file taxes on time. With our skilled team and advanced technological solutions by your side, we make the entire tax filing process seamless for you. Contact us today to get an instant quote.
Stay up to date with all things Accountants Now, tax law changes, tips and tools, and the industries best practices.