Tax Tips For the Self Employed Working at Home
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Those who are working in regular offices usually do not have to worry about filing their taxes. More often that not, their employers take care of all taxing concerns for them. For freelancers, taxation is usually a problem because they have to do all the work themselves. Determining which is taxable and how much can become confusing if you are a freelance worker. If you are one of them, here are some tax tips for the self employed working at home.
• Know the kind of deductions that you are entitled to. Some of common deductions available for self employed people are automobile expense, contract labor, inventory, office supplies, legal fees, accounting fees, postage and delivery and advertisement. Of course, it will depend on what kind of freelance profession you are in. There are some professions that will allow more deduction for freelance workers.
• Try to deduct taxes from the business portion of your house. If you are working at home and you have your own home office, there are some deductions you can make for the part of the house which you use for your work. You can have deductions on your mortgage, rent, utilities, renovation costs, insurance and real estate taxes. The bigger the portion you use for your business, the bigger your deductions will be. If your home office is separated from the main house, then the laws will apply to this separate office.
• When making deductions for contract labor, make sure to list all the expenses that you incurred. This will include fees for consultants and subcontractors. When making the list, make sure to specific titles, such as computer consultant or graphic consultant to label the workers. This is better than just writing them in as independent workers or contractors.
• Your credit card expenses can also be deducted. This is one of those effective tax tips for self employed that a lot of people know about. If you are using your credit card for business expenses, you can have some deductions made on your annual fee. If you have taken out a loan from your credit card to use for your business, they can also be tax-deductible. To make this easier, you should keep a specific and detailed record of the all the business expenses that you incurred using your credit card.
• Make your computer work more for you. You can actually have some deductions from your computer use, especially if you highly dependent on it for your business. The full cost of your computer and the expenses involved in repair and additional supplies can be deductible.
• Meals and entertainment can actually be deductible, as long as they are used for business. Breakfast and lunch meetings with clients, as well as the occasional drinks or dinner out, can be 50% deductible. You can also count in those gifts that you gave to your clients, up to a certain amount at least. Since these types of deductibles are very specific, you should always maintain a clean and clear record of every expense that you will incur.
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