Self-Employed Tax Deductions Make the Work Worth It
The question is whether self-employed tax deductions are worth the risk and investment in starting a business. Whether you are considering working for yourself or you have made the decision and would just like some reinforcement that you have made the right one, rest easy. There is a whole list of non-tax related reasons for starting our own business, including:
- You are your own boss.
- You earn more money.
- You spend less.
- You can enjoy variety of activities.
- No co-workers to deal with.
- Want a day off? Take one!
- You decide where you work.
- If you want better equipment or facilities, you make the decision.
- You set your work schedule.
- You choose your customers.
Those are all great reasons for starting your own business, but there is another and possibly the best reason; you keep more of your money.
If you are working for someone else, they set your income, take taxes out of that income, and you are just out that money. As a self-employed individual, you have the power to take advantage of self-employed tax deductionsi to keep more of your hard-earned money.
It surprises many new entrepreneurs just how much of their everyday personal income they can legally offset with deductions against their business income. An overview of the major classifications of self-employed tax deductions includes:
- Cost of goods sold – The cost of materials and parts that go into the production of goods that you sell in your business is a deductible expense.
- Office expenses – All of those seemingly small expenses that go into management of your business office are deductible. From printing paper to office equipment, you can deduct the cost of most in the year you pay for them.
- Rent for business facilities – If you rent your business space, you can fully deduct the rent amount.
- Depreciation of facilities value – If you purchase your business real estate, you can depreciate the value of the structure(s). This is money not actually coming out of pocket, but it provides a nice offset to income.
- Interest on real estate mortgages – If you purchase real estate for your business, you can deduct the mortgage interest as a business expense.
- Depreciation of major equipment – Very high cost equipment may not be deductible in full in the year purchased but is depreciated over its defined life span. If it is financed, the interest on the financing is deductible.
- Salaries and wages – If you have employees, you can deduct what you pay them as wages or salaries. If you have a business structure that allows you to designate yourself or family members as employees, you can also deduct some or all the wages paid as self-employed tax deductions.
- Benefits for employees – The costs of benefits such as insurance, hospitalization, vacation, or other benefits provided to employees are self-employed tax deductions.
- Retirement account contributions – If properly set up, contributions to retirement accounts for you and employees can be deductible.
- Home office expenses – If you have a home office as your principal place of business, you can deduct various expenses related to the space you use for business.
Self-employed tax deductions really do make all the work to start and operate your own business well worth the time and effort.