As you may know when you become self employed your taxes become much harder to keep up with. To save money in this economy you will need all the self employment tax deductions you can get. So here are ten tax tips that can save you some real cash.
1. Your home office can be a good place to start. Put together a map that outlines your work space in your home including the restroom. You can not deduct your entire home but just the part you work in. Things like a portion of mortgage, utilities, home insurance, property tax and maintenance done that year can all be a self employment tax deduction based on how much of a percent of your home is for work.
2. You can deduct all of your health and dental insurance premiums if you pay for it yourself and you are not able to qualify for your spouse’s employer plan. If you cover your whole family then you can deduct them as well. This is only for self employed people so take advantage of it.
3. Meals and entertainment can also be a good source for tax deductions. Just make sure you keep the receipts and do some work before or during the activity. You can get up to 50% off. Keep a chart of who you were with and when it took place. Also what business was discussed. Do this right so you will not get audited.
4. Your phone and internet use too can be a deduction. Make sure you only take out the portion that relates to your business. But if you keep a second line that is only for business then you can take the full cost off.
5. The interest occurred on the business loans and credit cards can also save you some money. With credit cards you must only deduct the interest that you got when you purchase something that is for your business.
6. The miles you put on your car for business travel is a difficult self employment tax deduction. The tip here is to use the standard mileage rate determined annually by the IRS. Keep track of the miles you drive and the dates. Then add up all the miles and multiply the total miles by that years rate and that will give you your amount. You can use the actual expense method but that requires much more detail work. If not done right then prepare to be audited.
7. If you have a specific publication that is related to your work then you can deduct the cost. This is not your local newspaper. If you are a fisherman and you subscribe to a fishing licensing journal then you could deduct that expense.
8. 100% of your travel expenses are deductible for out of town visits only. If you stay over night then you can deduct the hotel cost and 50% of meals and entertainment. If not then you can only take out the cost to get there and back.
9. Any education you acquired that is related to your business can also be a tax deduction. But do not try to save on classes that have nothing to do with your current company.
10. Self employment retirement plans can be the best tax deduction of all. If you make around $250,000 a year you can contribute up to 25% of your net income to a Simple IRA or Keogh plan. If you make less than that then you can contribute to both a self employed retirement plan and an IRA. You must be in the IRA’s income phase-out limit.
Hope you found these ten tax tips useful. These self employment tax deductions can save you a lot of money when you do your taxes. Just make sure you follow the tax laws very carefully or you could end up on the IRS’s audit list.