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Self-Employed Tax Deductions

Possible deductions include:

HEALTH INSURANCE - conditional, based on whether a self-employed individual is qualified to join their spouse’s medical plan. If you do qualify, you can deduct medical and dental premiums for spouses, dependents and children below the age of 27. This deduction is an income adjustment, not an itemized deduction, so it is not necessary to itemize it to claim it

TRANSPORTATION - can include mileage costs for business-related travel using your own car. However, you will need a mileage log to prove the travel expense. Alternatively, you can opt to deduct actual car related expenses such as gas, oil, depreciation, licenses and so on. If there are five or more cars registered to their business, you will have to go with actual expenses. Regardless of which method you use, the mileage log will be necessary to substantiate your business use. The log should not only include the beginning and ending mileage, but who you met with and the business purpose

EDUCATION - education for skills that can be used at work or continuing education requirements. This deduction covers tuition, lab fees, supplies, books and transportation to campus

HOME OFFICES - expenses related to a dedicated workspace at home, based on square footage. The deduction may apply to a portion of the mortgage or rent and other direct expenses paid on the entire house (utilities, repairs and maintenance, insurance). Alternatively, you can opt for a simplified deduction, which allows you to deduct $5.00 per square foot up to 300 square feet for a maximum deduction of $1,500

RETIREMENT SAVINGS - using a solo 401K or SEP, deductions can be taken for up to $58,000 (in 2021) in contributions

OFFICE SUPPLIES/FURNISHINGS/EQUIPMENT - office items, even if not used in the current year, can still be deducted

BUSINESS INSURANCE - business insurance, accident insurance, workers compensation, and employee health insurance are all covered under this deduction. Note that the deduction for workers compensation and employee health insurance are only available to your employees, not to the business owner

UTILITIES - utilities needed to run your business, like phone and internet costs. If you have a family plan, only expenses related to the business can be deducted

LOAN AND CREDIT CARD INTEREST - interest on loans to the business can be deducted, but is not limited to a business loan or business credit card. If the company uses a personal credit card to purchase something for business use, the interest on the payments can be deducted. If the credit card is mixed use, both personal and business, only the interest expense attributable to the business purchases can be deducted

START-UP COSTS - up to $5,000 in start-up costs and $5,000 in organization costs can be deducted. These include registration fees and other fees the business must pay to get started. Costs such as research, travel, marketing, and professional fees prior to the opening of the business fall into this category

BUSINESS TRAVEL AND MEALS - when traveling for the business, you can deduct the travel expenses (air, car rentals, hotel, taxi), including the cost of meals. For tax years 2021 and 2022, the deduction for a meal purchased in a restaurant is 100%

MEMBERSHIPS AND SUBSCRIPTIONS - these include professional organizations and business publications

ADVERTISING - advertising that helps promote your business. This can include business cards, ads, email blasts, fliers, product samples, website development and maintenance, and promotional items

EMPLOYEES AND CONTRACTORS - those you hire to provide services to the business. Contractors paid over $600 in the year will need to be issued a 1099

RENT - this could include office rent and/or renting machinery and equipment

BANK CHARGES - fees on bank accounts and fees charged by payment processors

LICENSES AND REGISTRATIONS - registering the business, business licenses, professional licenses

PROFESSIONAL SERVICES - accounting/tax services, lawyers, technical and other professional services

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