We have plenty of time before we need to file our income tax report on time and avoid interests and fines. Thus, if we haven’t had the chance to get around it, we still have some time left to take care of such an important matter. However, if we are freelancers or entrepreneurs working on our own company, this might be of great help. We are putting together three useful self-employed tax tips you should keep in mind before filing your income tax report this year.
We have talked about many different tax credits and deductions available for taxpayers, but these are some particularly interesting self-employed tax tips for solopreneurs. For example, deducting house expenses that result from home office activity. Also, health insurance expenses might also be deductible in some cases. Lastly, any education or training expenses that help us develop our current skills can be deductible too.
Home Office Deduction
Being self-employed and running your own business is not a difficult task. There are many challenges and situations one must face and overcome, including finding the right location. For many freelancers, working from home is the best way to start a business and keep it running without worrying about having to pay for rent. As a result, you might be able to get a tax break for home office expenses.
In order to deduct these expenses, you need to calculate the percentage of your home and the services that you use exclusively for your business. So, if your home office takes 10% of your house’s square footage, that is the percentage you can deduct. This deduction applies to rent, utilities, insurance, and any other expense that results from working at home.
You might be eligible for a health insurance self-employed deduction, but only in some cases. So, if you signed up for an insurance policy that would cover you, your spouse, and any children younger than 27, this might work for you. This deduction can also apply for dental insurance if you got that too.
Since this one works as an adjustment to income, there is no need to itemize our income report. However, we might not be eligible in some particular scenarios we should keep in mind. For example, if our spouse already had some kind of coverage plan and we didn’t enroll in it, we could lose this deduction. Especially if their plan was more expensive than the one we got. Therefore, we need to consult with a professional to see if we qualify or not.
It takes a lot of training and preparation to successfully run a business, especially when we are self-employed. Thankfully, we can deduct the expenses of qualifying work-related education and up training. These expenses include tuition, books, lab fees, supplies, transportation, and any other class expenses.
In order to be eligible for this deduction, this education or up training must help us maintain or improve any skills we need in our current job. So, if we are studying to change careers or only to satisfy the minimum level of education required in a job or industry, we might not be eligible for this deduction.