An increasing number of people are launching their own businesses. Government figures indicate that ¼ of the self-employed have an incorporated business operation. However, a full ¾ of all self-employed people have an unincorporated enterprise.
Nearly 11 percent of people in the U.S. are self-employed, representing 15 million individuals. It includes home-based businesses, those in the gig economy, entrepreneurs, startups, and small business endeavors.
Tax time is especially painful financially for the self-employed. They have to pay state and federal taxes, and may need to pay city taxes. Individuals need to pay FICA taxes and are forced to pay a self-employment tax. The good news is that there are a variety of deductions that can help ease the pain at tax time.
Those that work out of their home can deduct a portion of the total area of their home’s square footage if they’re self-employed, but not if they work for someone else. The space will have to be used regularly, be the principal place of business, and only be used for business purposes. Individuals can deduct the cost of rent for business space.
Credit Card Interest
Qualified business purchases placed on a credit card may be deductible. It can include phone bills, business travel, meals rent, internet service, office equipment, membership dues for professional organizations, and other expenses/utilities necessary for operating the business.
Training and Education
Taking a course to maintain or improve current skills relating to the business may be tax deductible. Expenses includes the cost of the course, tuition, books and supplies, and transportation.
Premiums for business insurance are deductible for those who are self-employed.
The IRS allows people that are self-employed to deduct 50 percent of their total self-employment tax, subject to certain income limits.
At Peavy and Associates PC our mission is to assist you with all your tax preparations, payroll and accounting needs. We provide our clients with professional, personalized accounting services and guidance in a wide range of financial and business needs. Give us a call today and discover why our clients return to Peavy and Associates, PC year after year!