Being self-employed and having the opportunity to take greater control of your own financial destiny definitely has some advantages, but you really need to know the lowdown on things like what tax deductibles and cuts they can use, in order to make the most out of being your own boss.
Having to finance your own business premises and vehicles can be a challenge, and as a truck wreck lawyer in Indianapolis for example, will confirm, time off the road can put a dent in your finances as well as having one in your vehicle.
Deductions and benefits
There are plenty of financial risks attached to being self-employed, especially as you don’t have the safety net of a regular pay check at the end of the month coming in, so that you can pay the bills.
The good news is that there are a decent number of lines of tax code that have been written, specifically to recognize that self-employed people need a bit of help with all of the extra costs associated with running your own business.
Far too often, many self-employed people simply fail to claim every business deduction available to them.
You have to qualify for certain deductions of course, but when you consider that the profitability of your business is largely dependent on how well you minimize your costs and how well you maximize your resources, it makes sound business sense to claim all of the deductions and benefits on offer to you.
Everybody earning a living has to pay taxes, but self-employment can often cost less than you imagine, especially as you should be able to deduct half of your self-employment tax from your net income.
The IRS regards what is referred to as the employer portion of your self-employment tax as an allowable business expense and will therefore permit you to deduct it accordingly.
Per a tax calculator you pay 7.65% tax regardless of whether you are employed or self-employed, but you do get to deduct part of your tax expense when you are self-employed. This means that you will only pay self-employment tax on 92.35% of your net business income.
You can claim certain expenses from running a home office and various other expenses such as health insurance premiums and motor expenses. It often pays to get some professional advice on what you claim and you might even find that what you pay in fees to find out this information, will save you a lot more in tax deductions.
It often pays not to just simply look at last-minute write-offs when it comes to self-employment tax deductions.
Although this is something you want to look at each tax year, it also pays to develop a more long-term tax-saving strategy.
There are numerous ways to do this, such as setting up a defined -benefit pension plan as a way of reducing your gross taxable income. As you get older, the tax laws currently allow to increase your contributions, as you draw closer to retirement age.
Rather than simply working out how much tax you have to pay, one of the advantages of being self-employed, is that you can also look at strategies that help you to reduce these payments.
Isabel Barry loves being her own boss, and has been registered as self employed for several years now. In her spare time she shares her tips, from tax deductions to just starting out. See her articles on a variety of business blogs around the web.