Top Tax Tips for Self-Employed Workers
Self-employed workers have difficulty filing their taxes every year. These workers need to pay taxes on their income in addition to self-employment taxes. But there are many deductions that can help them reduce their tax burdens.
Whether workers are fully self-employed or doing freelance work, there are costs in working without a boss or outside any organization. Thankfully, with proper record-keeping and tax preparation, some of these costs can be offset with tax deductions.
When filing a tax return for 2016, self-employed workers should look for savings in the major costs they incurred for the year, Kiplinger reports.
Home Office Expenses
One of the biggest expenses that can be written off is the use of a home office. A home office is defined as a separate small room in the worker's apartment or home used exclusively for business. Taking the office as a deduction can help eliminate some utility and insurance costs.
The IRS has simplified this deduction to allow $5 to be deducted for every square foot of the home office up to 300 square feet. This means up to $1,500 in deductions every year the home office is in operation.
Equipment and Materials
Equipment expenses can add up for self-employed workers. Computers, paper, and any other tools necessary to operate the business are all qualified write-offs. The most popular way to deduct the cost of these items is by expensing them -- also known as the Section 179 deduction.
By expensing them, self-employed workers get to deduct 100 percent of the cost in the same year these items were purchased, writing off up to $500,000 of equipment. Additionally, if workers need to be connected to the Internet or use a mobile phone, they can deduct these costs too.
Business Travel
Travel expenses can all be written off as well. Maybe the worker had to travel to a sales conference or a meeting. As long as business was discussed for at least one hour, the mileage to the meeting can be written off, USA Today explains. The standard deduction for business mileage is 57.5 cents per mile. That amount can add up quickly in just a few drives for business.
Health Costs
Since self-employed workers are working for themselves, they have no employer-paid health insurance. This means they have to purchase their own health insurance. Thankfully, self-employed workers can deduct their health insurance premiums on their tax returns without having to itemize health and medical expenses.
Taxpayers who do not have health insurance will be penalized through the "individual mandate" penalty, but self-employed workers get the benefit of deducting their premiums.
Education, Training and Books
Any training or education can be written off as well. A self-employed worker should note any books, college courses, association dues or membership fees on Schedule C of the tax form, as long as they have proof of these expenses and justification for their use.
With many of these deductions, self-employed workers can reduce their self-employment tax burden and reduce the stress of filing.
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