When one begins on the path of self employment, tax deductions can mean the difference between success and failure when taken legally and wisely. Of course, there is some wiggle room when it comes to deciding just what is and isn’t a acceptable as a deduction. The IRS has several examples of decisions that serve as tax law president,
Self employment tax deductions are able to be taken for just about any expense that you legitimately use for the business and the business alone. This can include a great deal of home office furnishings, equipment and services. For instance, part of your rent or mortgage is deductible as the percentage of it that your office occupies.
A professional accountant who specializes in self employment issues will be able to decide whether your large-ticket item pieces of equipment should be depreciated rather than deducted, since one can often save more money over the long period the items looses money rather than taking the whole “lump sum” approach of taking all such expenses as as self employment tax deductions. The obsolescence cycle for computers and other technological equipment is quite short compared to a car or the building
Since self employment tax deductions are not limited to the office, you can also take mileage if you business requires you to travel locally or abroad. As one of the self employed, you can even deduct the mileage you use to go to the store and by other things for your business to good use.
You can deduct nearly all your travel expenses at the end of the year or figure in into your self-assessment plan (to be filed quarterly). However, you need to be careful that you don’t include any dinner or drinks in this figure – those can only be 50% deducted. However, since you’re self-employed, you can begin accruing mileage as soon as you leave your home, since that is your office, after all.
Many people choose to spend their money on opulent lodgings when they travel for business and eat very inexpensively to sort of “angle” their spending towards a good way to encourage self employment tax deductions that are perfectly legal.
The same could be said for making in effort to start the business slowly and expand by reinvesting the first few years of profits (rather than taking a paycheck, often). These self employment tax deductions will lighten your tax burden during those first few years. Since monies that are reinvested into equipment and marketing are legitimate self employment tax deductions. Also, a lower initial tax bill will set a president for the IRS that will keep you from being the victim of unwanted attention from that agency.
Stay legal and stay safe. Consult an accountant that specializes in self employment if you have any questions or concerns.