Self-Employed Deduction Info

Learning self-employed deduction information is very important when it comes time to file your taxes. As a self-employed individual, you can deduct many things from your taxable income. Here are a few things to consider about self-employed tax deductions.

Health Insurance Premiums

If you are self-employed, the cost of your health insurance premiums is completely tax-deductible. However, in order to qualify for this deduction, you cannot be eligible for insurance coverage under any group plans. For example, if you are self-employed, but your spouse works for an employer that offers health insurance coverage for you, you would not be able to deduct your health insurance premiums.

Self-Employment Tax

When you are self-employed, you will have to pay a 15.3 percent self-employment tax. This pays for your Social Security tax and Medicare tax together. While this may seem like a large tax to pay, you actually get to deduct half of what you pay on your personal income taxes. Therefore, this can be a very substantial deduction at the end of the year that you do not want to forget.

Business Supplies

Any supplies that you buy for your business can be deducted from your taxes. For example, if you work from your home office, you can deduct things like printer paper, printer cartridges, pens, your computer, office furniture, and anything else that you buy for your business. Just be careful not to deduct things that are also for personal use. If you use your computer for personal matters and business matters, do not deduct the cost of it.

Business Car Expenses

If you frequently drive in order to perform business functions, you can deduct some of the costs associated with this. If you keep track of your mileage for business trips, you can deduct a certain amount for every mile that you drive. If you have a car that is used only for business, you can also choose to deduct all of the maintenance costs for the car in a given year. However, if you use this car for personal use as well, you will not be able to take this deduction.

Cell Phones

You can also deduct the cost of your cell phone as long as you use it only for business calls. If you have only one cell phone and it doubles as a work and personal phone, you will not be able to deduct its cost. If you try deducting this, the IRS will most likely disallow the deduction.

Home Office Deduction

One of the best deductions that you have available to you as a self-employed individual is your home office deduction. When you have a home office, you can deduct part of the costs that are associated with your home. Measure the square footage of your office and determine what percentage this represents of the total square footage of the house. You can then use this percentage to calculate a deduction from your mortgage, the electric bill, the gas bill and the water bill. This can provide you with a fairly substantial deduction at the end of the year.