Being self-employed comes with the benefit of being your own boss, but also the responsibility of managing your own taxes. Here's some guidance on tax deductions for self-employed workers:
General Tips:
Track your income and expenses. This is crucial for calculating your net profit and maximizing deductions.
Understand the difference between business and personal expenses. Only business-related expenses are deductible. Try not to comingke funds from your business and petsival bank accounts.
Save receipts for all business purchases. The IRS may request documentation during an audit. If you don’t want to have to save paper receipts,Quickbooks Online allows you to take pictures of your receipts and save them digitally. Very convenient in my opinion! The less paper the better.
Common Deductions:
Home office deduction: If you have a dedicated workspace in your home, you can deduct a portion of your rent or mortgage, utilities, and homeowner's insurance.
Business expenses: This includes office supplies, equipment, software, internet, phone bills, and professional fees.
Vehicle expenses: You can deduct mileage driven for business purposes using the standard IRS mileage rate or by tracking actual expenses (gas, repairs, maintenance).
Health insurance: Self-employed individuals can deduct a portion of their health insurance premiums as a business expense.
Retirement contributions: Solo 401(k)s and SEP IRAs allow self-employed individuals to significantly reduce their taxable income by contributing to retirement savings.
Continuing education: Educational expenses related to your business can be deducted.
Startup costs: Certain business startup costs can be deducted in the first year.
Additional Resources:
IRS Self-Employed Individuals Tax Center: https://www.irs.gov/businesses/small-businesses-self-employed/self-employed-individuals-tax-center
NerdWallet - Self-Employment Tax Deductions: https://www.nerdwallet.com/h/category/tax-credits-deductions
Remember: This is not an exhaustive list and tax laws can be complex. Consider consulting with a tax professional for personalized advice on maximizing your tax deductions and navigating self-employment taxes.
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