As a self employed tax payer, you must be aware of the fact that keeping up with the taxes is not an easy task while looking after your business. If you want to save money, you should have thorough knowledge about all the IRS relief and tax deductions provided to self employed taxpayers by the IRS. In case, it is not possible for you to concentrate on tax law while managing your business then you should employ a tax professional or experienced CPA who can make you aware about the tax law and recent changes made by the IRS so that you can save money from taxes without making any errors that could occur as big problem in future.
Home office is the best thing to start with. If you think you can deduct your complete home under home office deduction, you are more likely to receive notice from IRS for faking deductions. Therefore, you should first outline the office space including the restroom(s) to calculate the exact office space. Portion of mortgage of the home, property tax, home insurance and maintenance expenses in the complete financial year can be saved as self employment tax deduction. The amount will be calculated on the basis of the percentage of home you are using for your office.
Premiums for you are paying for your health and dental insurances also fall in the category of self employed tax deduction. You can avail this kind of deduction only in the case when you are unable to qualify for your spouse’s employer plan. If you are paying premiums for your whole family then you will deduction for them as well. These days there is hardly any business that can run without computer and internet. Expenses of phone and internet also fall in the category of tax deduction. In case you are using the same phone and internet line for your home as well as office then you should deduct only a portion of expenses. If you have completely different line for your business then you can deduct the full cost of the internet and phone.
One of the easiest deductions that you can get while running your business from home is the deduction on meals and entertainment expenses. However, it is common tendency that we don’t feel like keeping the bills and receipts with us. But to avail deduction on your entertainment and meals expenses, you should have receipts to prove that deduction is genuine. You can get deduction of as high as 50% of the expenses. Majority of self employed taxpayers have taken loan to grow their business, so the interest you are paying on your loan amount and credit cards is also deductible. Make sure you are deducting interest on your credit only for the purchase that was meant for your business.