Many of us become self-employed because we are either looking for financial freedom, or looking to earn extra cash so that we can save a down payment for our home. The safest way to start earning self-employed income is start it on the side while keeping your current full-time job. This brings us to the important question; what deductions am I allowed so that I reduce my income tax as a result of these extra earnings?
They are as follows:
- Home Office. Calculate the portion of your home that you use for self-employed income, then deduct that percentage of rent or mortgage payments, utilities, home insurance, property tax and home maintenance.
- Business Entertainment. Deduct 50% of the cost of meals or events that involve business discussions.
- Communications. Calculate the portion of phone, cellphone and Internet that are for business, then deduct that percentage of monthly bills.
- Transportation. Keep track of how much of your vehicle’s mileage relates to business, then deduct that percentage of costs for gas, maintenance, insurance, etc.
- Subscriptions. Deduct the cost of magazines, newspapers, websites and cable channels related to your business.
- Travel. Deduct business travel costs such as airfare, subway tickets, hotels and en route meals.
- Continuing Education. Deduct the cost of courses that make you more effective in your business.
BE SURE TO KEEP ALL RECEIPTS!