Self-employed expense deductions

A man in a bright orange safety jacket and gray hat stands in an urban setting at night, with a McDonald's and other storefronts visible in the background. Other people are around, one of whom is holding a small dog.

Common Self-Employed Deductions:

  1. Home Office Deduction: Deduct portion of rent/mortgage interest, utilities, and maintenance expenses for home office space.

  2. Business Use of Your Car: Deduct mileage or actual expenses for business use of vehicle.

  3. Business Expenses: Deduct expenses related to business operations, such as:

    • Equipment, supplies, and materials

    • Travel expenses (transportation, lodging, meals)

    • Professional fees (consultants, lawyers, accountants)

    • Advertising and marketing expenses

  4. Self-Employment Tax Deduction: Deduct half of self-employment tax as a business expense.

  5. Health Insurance Premiums: Deduct health insurance premiums as a business expense.

  6. Retirement Plan Contributions: Deduct contributions to SEP-IRA, solo 401(k), or other retirement plans.

A man is working at a cluttered desk filled with papers, a computer monitor displaying charts, and multiple phones. He is holding a phone receiver to his ear with one hand and writing notes with a pen. The background includes hanging jackets, a clock, and organized files.

Forms and Filing Requirements:

  1. Schedule C (Form 1040): Report business income and expenses.

  2. Form 8829: Calculate home office deduction.

  3. Form 4562: Calculate depreciation and amortization.

  4. Self-Employment Tax (Schedule SE): Report self-employment tax.

Key Considerations:

  1. Business Use Percentage: Calculate business use percentage for home office, car, and other expenses.

  2. Record-Keeping: Keep accurate records of business expenses, income, and mileage logs.

  3. Business Entity: Consider forming an LLC or S-Corp for tax benefits and liability protection.

Tax Planning Strategies:

  1. Maximize Business Expense Deductions: Keep track of expenses throughout the year.

  2. Consider Retirement Plan Contributions: Contribute to retirement plans for tax benefits and savings.

  3. Consult a Tax Professional: Seek professional advice for complex tax situations.

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