Self-Employment Tax – Self employed individuals are required to pay Social Security and Medicare Taxes on income earned. An employer usually pays . of these taxes and an employee usually pays the other half (limitations may apply to the amount of taxes collected). A self-employed person is responsible for paying in 100% of the taxes.
To mitigate this effect, self-employed persons are allowed a deduction for . of the taxes due.
Health insurance Premiums obtained through the private market – The premiums paid may be allowed as a deduction as a direct adjustment to income rather than an itemized deduction.
Vehicle Expenses – A self employed person can either use the standard IRS rate or actual expenses for vehicles used in business. Examples of direct expenses include gas, repairs, depreciation, etc. Detailed/contemporaneous records must be maintained to take the deduction.
Internet and Phone Expenses – Internet and Phone expenses may be deducted when business related. When the internet and phone are used for both personal and business purposes. Detailed records must be maintained to determine the business portion of the use. Personal use is not deductible,
Marketing Expenses – Expenses to market your business including radio or television ads, social media, and other marketing methods may be deductible.
Business Meals – Meal Expenses paid for clients or prospective clients are deductible at 50% of the total cost.
Entertainment expenses are not deductible. If you’re self employed, please consult your tax advisor/tax preparer for other expenses specifically to your business that may be deductible.
Article Written by:
Terri G Larry, CPA
Contact information: terrilarry07@gmail.com
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