Start a Small Business for Lucrative Self-Employed Write-Offs
There are websites and articles everywhere about how the gig economy is growing exponentially. Those are the freelancers and work-from-home independent contractors that enjoy making a nice living while not answering to a boss at their cubicle watching their every move. While the working from home benefits are great if you can maintain your focus, the real benefits of self-employment are the self-employed write-offs for taxes.
The employed worker has few if any options for cutting their tax bill, especially if they do not have enough deductions to itemize for tax purposes. Their taxes are deducted from their paycheck and they either get a refund or owe money at the end of the year. Contrast the self-employed worker who has much more control and many more opportunities to save on taxes through self-employed write-offs to reduce taxes on income.
- Production parts or materials – if you sell things that you make or assemble, you can deduct the cost of the materials and parts that go into the production of those products.
- Labor – if you hire labor to produce, sell, or man your store, their wages are deductible.
- Supplies – supplies used in making or selling your products or services are self-employed write-offs. This includes office supplies.
- Equipment – equipment used exclusively in your business, such as computers, production equipment, etc. is a deductible or depreciable expense and a valid self-employed write-off.
- Space rent – if you rent your store or office space, the rent is deductible. If you pay utilities, those costs are deductible as self-employed write-offs as well.
- Real estate – if you purchase real estate for exclusive business use, you can depreciate the cost/value of the structure. This is a deduction that is not cash out of pocket, as it is a portion of the value deducted each year. Also, your mortgage interest is deductible, as well as real estate taxes. As with rental space, utility expenses are deductible as well. Another self-employed write-off is maintenance and repairs on the business real estate.
- Vehicle expenses – if you purchase a vehicle solely for business, you can deduct the expenses of operation, as well as interest on the financing. You can also depreciate the value as with real estate. The operating expenses can be taken as a per-mile of operation deduction but consult a CPA for the best way to handle vehicle expenses.
- Education and training – if you take courses to improve your business or performance, the cost of the training is deductible. This can include the costs of transportation to the place of training and any associated hotel or lodging costs. Again, consult a CPA for the allowable self-employed write-offs.
- Home office – if you maintain a space in your home for exclusive business use, there are a couple of ways to take a deduction for that space. Both require a designation of the square footage as a percentage of the full home size. Then you have a choice of deducting each expense line item with that percentage or a simplified method with a flat rate.
Self-employed write-offs are an amazing tax benefit to those who can operate their own freelance or other small business.