The article below is up to date based on the latest tax laws. It is accurate for your 2017 taxes, which you will file by the April 2018 deadline. Learn more about tax reform here.
Can you believe the end of the year will be here in no time? If you’re self-employed, that means the countdown is on to reduce your 2017 net income by making tax-deductible purchases related to your work. This includes educational expenses, like taking a class or buying materials related to improving your business. Also deductible? Technical purchases for self-run businesses like computers, mobile phones and servers. Up to $500,000 in equipment is eligible for writing-off on your taxes, but that amount is reduced if you put more than $2 million worth of new assets into service during one year.
That said, many self-employed deductions are less obvious because they don’t involve purchasing a good or service. Read on to ensure you are taking all the deductions allowed for self-employed filers.
Business Use of Your Home: If you use part of your home regularly and exclusively to perform administrative or managerial activities for your business, you can claim a home office deduction for utilities, rent, mortgage interest, depreciation, and cleaning fees based on the square footage of your home used for your business.
Automobile Expenses: If you travel for business, even short distances, you may deduct the dollar value of miles traveled. You can claim the actual expense you incurred or use the standard mileage rate prescribed by the IRS, which is 54 cents as of 2017. The IRS allowable mileage rates should be checked every year because they can change. Air, bus, or train fare related to work can be written off, as well.
Health Insurance Premiums: You can deduct what you pay for medical insurance for yourself and your family, and it doesn’t matter if you itemize and it doesn’t matter what your adjusted gross income may be. Though keep in mind, you don’t qualify if you are eligible for health insurance through a spouse’s job.
Self-Employment Taxes: If you’re self-employed and have to pay the full 15.3% “Self-Employment Tax” covering Social Security and Medicare taxes, you can write off half of what you pay. And you don’t have to itemize to qualify.
Contributions to a SEP IRA: You still have time to increase your nest egg and save on your taxes. Self-employed individuals can contribute to a SEP IRA and deduct contributions as a business expenses. For 2016, business owners can contribute up to 25% of income or $53,000 to their SEP IRA.
Don’t worry about knowing deductible business expenses. TurboTax will ask you simple questions about you and your business and give you the business deductions you are eligible for based on your answers saving you money for your business.