Taxpayers who run their own businesses, or freelancers should look for any way possible to save money at tax time. There are three different deductions that can help put more hard earned cash back in your pockets.
Self-employed taxpayers can deduct certain business expenses that meet the following criteria:
- An accepted and usual expense related to doing business within your industry. These expenses can be a computer for journalists or writers, or even business dinners with clients in jobs where that is a common practice.
- Appropriate and improve efficiency in your line of work. While the expenses aren't required to be indispensable, they should make doing your job easier.
Paying for your own health insurance can get expensive, but thankfully you can deduct the full amount on your Form 1040 as a personal expense. Health insurance costs are an above-the-line deduction, to be taken on line 29 of the form 1040 for businesses who have profited in the tax year. If your business did not profit, health insurance expenses will be claimed as a below-the-line deduction, as a medical expense and you must itemize.
Many self-employed individuals work from their home. In these cases, if a majority of the work is done from a home office, the cost may be deductible. You can calculate the deduction on Form 8829, however you can't claim a larger deduction than your net profit. If this occurs, you'll have to carry the extra over to the next tax year.