Tax Strategies: Top 10 Tax Tips for Self-Employed By Jan Verhoeff
Self-employment offers a multitude of tax benefits. Opportunities to maximize your income while increasing your income may actually mean you are paying more tax, but at a lower percentage of your income. As Americans it is our duty to pay our fair share of tax to support our government, however, IRS and legislature have provided many opportunities to maximize personal benefits while minimizing personal tax debt.
The following tips are commonly known, although many do not use them well.
1. Keep good records. While a good accountant may be beneficial to your business, and services of a quality accounting service are fully deductible, this is often not a financial option for smaller businesses. However, good record keeping is always an option. Most computer programs have minor accounting programs that will handle basic record keeping for a small business.
2. Office space is deductible. Maintaining an office in your home or business site, both require space and there are allowances for a home office. Specifically the square footage that is dedicated office space for your business, any and all equipment purchased to operate your home office, and improvements made for the purpose of efficiency.
3. Business expenses are important. Along with keeping good records, it’s extremely important that you keep records of all business expenses. A daily diary where you log any expenses for business costs is an excellent way of managing your petty cash. A checking account to pay all larger costs is imperative. If credit cards are used, you must keep detailed expense records, in order to deduct interest on cards. (Mentioning these in your daily diary is an excellent method to keep track of them.)
To subscribe to IRS newsletters, CLICK HERE
Tax Deductions for Individuals
With the 2011 Returns Filings pretty much behind us and April 15 still comfortably far away, it’s a good time to start strategizing on ways to save money once things get serious. With that in mind, we have identified 9 deductions that individual tax payers should use – but often forget.
1. Charitable Donations
Sure, the donation is deductible, but so are the expenses incurred while doing the charitable work – including possibly cleaning your candy-stripers’s outfit or the mileage on your car for taking all those life-saving materials to those in need.
2. Moving Expenses
Not only can you deduct many moving expenses when you relocate – you can even deduct your very first relocation – say, after college.
3. Job Hunting Costs
Costs associated with looking for a new job while in a current job are deductible, as long as the taxpayer itemizes – and the costs, along with other miscellaneous itemized expenses, exceed 2 percent of the taxpayer’s adjusted gross income.
4. Military Reservists’ Travel Costs
Reservists and members of the Nation Guard who travel more than 100 miles in a day and stay overnight for training can deduct related expenses.
5. Child and Other Care Costs
Child care costs for looking after the rug rats during summer can be deductible too – only for day-camp, not sleep away camp. Care expenses for adult dependents may also be deductible.
6. Mortgage Refinancing Points
If the taxpayer used the proceeds of a mortgage refinancing to improve their principal residence, they may be able to deduct the points paid on the loan for the year of purchase.
7. Many Medical Costs
Various medical costs – like travel expenses to and from treatments – may help taxpayers reach the 7.5 percent of AGI threshold for claiming medical expenses.
8. Retirement Savings
The Retirement Savings Contribution Credit aims to get moderate and low income taxpayers to save and can be worth as much as $1,000 on contributions to an eligible retirement account.
9. Educational Expenses
There’s tons here, including deductions for tuitions and fees, the Lifetime Learning Credit and the American Opportunity Tax Credit. If the taxpayer is getting any kind of education, they’re worth looking into.