There are several tax benefits to being self-employed. Not everyone is aware of them, but there are write offs that you can use as a self-employed professional that may not be available to regular employees. You should be prepared with proper documentation to take advantage of such benefits.
Tax Benefits for the Self-Employed Professional
If you are self-employed or have a full-time job and a side business, you may be able to take advantage of some of the following tax benefits:
- Any money you spend for your business can be deducted from your taxable income. That means you do not pay taxes on items such as a camera if you are a photographer, a computer and desk if you are a writer or one is required for your work, equipment or tools used for your trade, office space or studio space if it is used for your business. The list of potential write offs is long.
- You get a deduction on the amount of money you pay for Medicare and Social Security taxes. This deduction reduces your taxable income.
- Your home office, if you have one, is deductible. That means, you will have to calculate the portion of your home it consumes and divide expenses to determine how much of a deduction you will be entitled to.
- Child care costs may be deductible.
- If you set up a retirement plan, you may be able to deduct at least a portion of what you put into it from your taxable income. Plus, you will get started on saving for retirement. Something more people should think about.
- If you notice that you are jumping to a higher tax bracket due to your income, you have some options as a self-employed person, you can spend more money on business expenses so that you can take a deduction that way or you may be able to defer some of your income by asking to be paid in the next fiscal year.
Getting Legal Help
If you need help sorting out your tax situation, consult a tax attorney today to get advice. It is important to plan ahead regarding taxes or you may be faced with penalties, fines and other consequences. The IRS takes tax evasion seriously. You may be newly self-employed and trying to figure out your tax benefits or have been handling them for years but had some changes this year. Whatever your situation, an attorney can answer your questions and help you get organized to plan your financial strategy.
