“Is This Deductible?” 8 Must-Know Self-Employed Tax Deductions and Benefits for 2019

By 2020, experts anticipate the number of self-employed Americans rising to 27 million. Are you part of this group already? Do you plan to join it in the near future?

Either way, one of the greatest lessons you can learn early on in your career is the deductions you can take advantage of when filing your taxes.

If you make use of every deduction and credit available to you, you’ll avoid paying more than you have to and will have more capital available to help you run your business.

Read on to learn about some of the most important self-employed tax deductions every entrepreneur ought to know.

1. Home Office Deduction

If you’re self-employed, you likely spend a lot of time working out of your home. Having a dedicated workspace in your home isn’t just good for focus and productivity. It also helps to reduce your annual tax bill.

If you don’t have a home office, now’s the time to create one. Then, when the time comes to pay taxes, you can deduct some of the expenses related to that office from your final bill.

The IRS allows you to deduct a percentage of your bills (including rent, internet, and utility bills) based on the size of your home office. You can also deduct the cost of supplies needed to keep that office running, such as paper and ink for your printer.

2. Retirement Plan Deductions

As a self-employed individual, you have to sacrifice the cushion of an employer-provided 401(k). That doesn’t mean you’re without options when it comes to retirement savings, though.

There are lots of ways for you to continue saving for the future, including using an IRA (short for Individual Retirement Account).

The money you deposit in these independent accounts is also tax-deductible and can be subtracted from your annual tax bill. Keep in mind, though, that you’ll have to pay taxes on the money you deposit in these accounts when you make withdrawals during retirement.

3. Educational Expenses

As a business owner, you ought to make continuing education a priority. There are a number of seminars and classes you can take to further your knowledge and enhance your skills.

Keep in mind, too, that you get to deduct any educational expenses you accrue throughout the year from your final tax bill.

In addition to the costs of classes and seminars, you can also deduct subscriptions for publications that may provide you with information related to your business. You can deduct the cost of a membership to certain professional organizations as well.

4. Health Insurance

Health insurance is the bane of a lot of entrepreneurs’ existence. They know that it’s important to have, especially in the event that an emergency happens, but they also know that it can be a real drain on their bank account.

Luckily, you can soften the blow a bit by deducting your insurance premiums. In order to be able to do this, you have to meet certain criteria laid out by the IRS. It’s still worth looking into, though, if it helps you save some money later on.

5. Travel Expenses and Mileage

If you have to do any traveling for your business, you can deduct a portion of your travel-related expenses.

This includes the price of airline or train tickets when you have to travel to a specific destination. You can also deduct a certain amount of money for every mile that you drive that’s related to your business operations.

There are two options for this. The first is the standard mileage deduction, which allows you to subtract 58 cents for every business-related mile you drive. You can also take a deduction based on the actual costs of things like fuel, licensing, and maintenance.

You may also be able to deduct the cost of some public transportation expenses.

6. Contract Labor Expenses

Maybe you’re not ready to bring on full- or part-time employees to help you run your business. You might, however, have times when you need to bring someone on to provide you with temporary help or assist you with a specific task.

If you hire someone as a contract laborer for help with something like building a website, you can deduct the money you paid them for their services from your tax bill. You can also, in many cases, deduct the cost of other tasks that you outsource, such as tax preparation fees.

7. Self-Employment Taxes

We’ve got good news and bad news.

First, the bad news. When you’re self-employed, you’re responsible for paying additional Medicare taxes on what you earn and on a portion of what your partner earns (even if your partner is not self-employed) if it exceeds a certain threshold.

The good news, though, is that you can deduct 50 percent of these additional taxes that you pay. The IRS allows you to treat it as a business expense.

8. Start-Up Costs

If you’re just barely starting to get your business off the ground, you may want to talk to your accountant or CPA and learn more about how you can write off a portion of your business’s start-up costs.

The IRS will allow you to deduct up to $5,000 in costs related to starting your business. Some examples of these kinds of costs include the following:

  • Market research
  • Travel needed to start your business
  • Advertising
  • Legal fees
  • Accountant fees

You can also deduct organizational costs up to $5,000. This includes things like state filing fees.

Take Advantage of These Self-Employed Tax Deductions Today

Paying taxes can be one of the most intimidating obstacles new entrepreneurs have to overcome. If you keep these self-employed tax deductions in mind, though, your annual tax bill will be a lot smaller and less overwhelming.

Do you need more help in managing your business finances? Whether it’s handling debt, applying for loans, or just staying on top of your funds, we’ve got lots of articles that you might find useful.

Check out the other finance-related articles on our site today to learn more.

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