Tax Deduction Cheat Sheet
Maximize Your Write-Offs with 10 Essential Tax Deductions for Self-Employed Professionals
Filing your taxes can be a daunting task, but there's good news - there are plenty of tax deductions available to help reduce your taxable income and save you money. In this blog post, we'll reveal the top 10 essential tax write-offs for self-employed individuals.
Discover how to maximize your savings and keep more money in your pocket.
Business Use of Home
If you work from home, you can deduct expenses related to your home office, including rent, mortgage interest, property taxes, utilities, and insurance. To claim this deduction, your home office must be used exclusively and regularly for business purposes.
Business Vehicle Expenses
If you use a vehicle for business purposes, you have two options for writing off vehicle expenses. You can deduct expenses related to the vehicle either with the Standard Mileage Rate provided by the IRS (58.5 cents/mile for the first half of 2022 and 62.5 cents/mile for the second half of 2022), or you can deduct actual vehicle expenses (such as gas and oil, maintenance and repairs, etc.).
The best method for you (or the best for tax savings) will depend on a number of factors, including your business habits, vehicle usage, ownership, etc. We often find that Standard Mileage Deduction offers the most tax savings for our customers, but consult an advisor to learn which is best for your situation.
Supplies and Equipment
As a self-employed professional, you can deduct expenses for supplies and equipment necessary to run your business, such as computers, software, office supplies, and furniture. Keep receipts and invoices to ensure you can claim these expenses accurately.
Advertising and Promotion
Self-employed individuals can deduct expenses for advertising and promotional activities, such as business cards, flyers, and online ads. This deduction can be particularly valuable for freelancers and small business owners looking to grow their client base.
Insurance Premiums
Self-employed individuals can deduct premiums paid for health, dental, and liability insurance. This deduction can be a significant tax saver for self-employed professionals who pay for their own insurance.
Travel Expenses
If you travel for business purposes, you can deduct expenses for airfare, lodging, meals, and transportation. Keep a detailed record of your business-related travel to ensure you can claim this deduction accurately.
Professional Services
Self-employed individuals can deduct expenses for professional services, such as legal and accounting fees, costs for subcontractors, or any other 1099 fees. This deduction can be particularly valuable for those seeking advice on tax planning and strategy. The type of deductions you are allowed can depend on your business and industry, so always consult a professional before claiming a deduction you’re unsure of.
Retirement Contributions
Self-employed individuals can deduct contributions made to a retirement plan, such as a solo 401(k) or SEP IRA. This deduction can be a valuable tax-saving tool while also helping you save for retirement. As of March 2023, it’s not too late to make retirement contributions for 2022. Don’t miss out in this invaluable tax-saving strategy that will help you save for retirement.
Education and Training
Self-employed individuals can deduct expenses for education and training related to their business, such as conferences, courses, continuing education required for licensing, and seminars. This deduction can help you improve your skills and knowledge while also reducing your tax bill.
Depreciation
Self-employed individuals can deduct the cost of assets used in their business over time through depreciation, such as equipment or vehicles. This deduction can be particularly valuable for those with expensive equipment or vehicles that will be used for several years.
This is a lesser-known tax strategy for self-employed, but can significantly reduce your tax liability. This one gets a little complicated, and you want to make sure you are in line with the tax code, so as always, consult a professional before claiming depreciation.
Take Advantage of These Essential Tax Write-Offs for Your Self-Employed Business
As a self-employed professional, it's crucial to take advantage of every available opportunity to reduce your taxable income and save money. Please note some of these deductions are complex and require a lot of knowledge about the tax code and other factors like your income, state, industry, and business entity type such as LLC or S-Corp. Always consult a professional for advice.
What are you waiting for - start planning and organizing your finances now!
Curious how much you could save on taxes? Use our tax calculator.
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