As a self-employed individual, you are responsible for tracking your own taxes and making sure you claim all the credits and deductions you are entitled to. In this blog post, we will discuss some of the most-overlooked tax deductions and credits for the self-employed. Don’t miss out on these valuable tax breaks!
Deducting Business Expenses
The most-overlooked tax deduction and credit for self-employed individuals are deducting business expenses. If you are self-employed, you can deduct a variety of business expenses from your taxes, including office supplies, mileage, travel expenses, and more. You can even deduct a portion of your rent or mortgage if you have a home office! This is a great way to reduce your taxable income and save money on your taxes. Namely, the home office deduction is one of the most lucrative tax deductions for self-employed individuals since it can be a large expense.
Make sure to keep track of all your business expenses throughout the year, so you can claim them on your tax return and save yourself some money.
Home Office Deduction
If you use a part of your home for business purposes, you may be able to claim a home office deduction. This deduction allows you to deduct a percentage of your mortgage or rent, utilities, insurance, and other household expenses.
To qualify for this deduction, you must use the space regularly and exclusively for business purposes and it must be your principal place of business. Moreover, the space must be a separate and distinct area within your home.
Health Insurance Deductions
If you are self-employed and pay for your own health insurance, you can deduct the cost of your premiums from your taxes. This includes both medical and dental insurance premiums. You can also deduct the cost of long-term care insurance premiums. Remember to keep track of your health insurance expenses, as they can add up quickly. However, this deduction is only available if you are not eligible to participate in an employer-sponsored health insurance plan. Otherwise, you would need to claim the premiums as an adjustment to income.
Self-Employment Tax Deduction
If you are looking for credit for self-employed workers, you may be able to deduct the cost of your self-employment tax from your taxes. Similarly, there are some purchases that you can simply write off as self-employed. Namely, this tax is imposed on self-employed individuals and is equal to the Social Security and Medicare taxes that are normally withheld from wages. The deduction for this tax is available even if you do not itemize deductions on your tax return. You can save even more money on your taxes by taking this deduction.
Retirement Plan Contributions
If you are self-employed, you can deduct contributions to a retirement plan from your taxes. This includes both traditional and Roth IRA plans, as well as SEP-IRA and SIMPLE IRA plans.
You can also deduct contributions to a Solo 401(k) plan. This deduction can be a valuable way to reduce your taxable income and save for retirement at the same time. Even more so, the contributions can be made in the pre-tax or post-tax form, giving you even more savings.
Earned Income Tax Credit
Yet another credit for self-employed individuals is the earned income tax credit. If your adjusted gross income is below a certain level, you may be eligible for this credit. The amount of the credit can vary depending on your income and filing status, but it can be a significant saving.
Namely, this credit can be worth up to $600 for single filers and $1200 for married filers. Moreover, the credit is refundable, which means that you can receive a refund even if you do not owe any taxes. So, if you are eligible for this credit, be sure to claim it on your tax return.
So, as you can see, there are many valuable tax deductions and credits available to self-employed individuals. Make sure to research all of the options available to you and claim as many as possible on your tax return. This can help reduce your taxable income and save you money on your taxes.