Over the past few years, we’ve seen a
rise in freelancers and those who are self-employed. Whether you’re working as a freelancer or enjoying making money in the fast-growing
sharing economy, you still need to report your income at tax-time. Although we all have to pay taxes, you can substantially reduce your tax liability with tax-deductible expenses.
If you are new at this, don’t worry. We’ve identified eight of the most surprising tax deductions you shouldn’t miss:
Cost of Your Car (if Used for Business)
Most new business owners are aware that you can deduct your mileage, but what about the money you shelled out for your car? You may be able to deduct the cost of your car -- up to $25,000 for cars and SUVs under 14,000 pounds -- if your car is used directly for your business. Also, don’t forget about car expenses, like repairs, washes, new tires, and other deductible car-related expenses.
Start-up Costs
If you just started your business in 2015, you can deduct startup costs like legal fees, cost of experimentation, and advertisements for the opening of the business.
Home Office Deduction
If you have the luxury of working in your PJs and you have a dedicated space in your home used only for business, you can take the home office deduction for a percentage of your home expenses -- like mortgage, utilities, and property taxes based on the percentage of square footage used for business. The IRS also allows you to take a Simplified Home Office Deduction up to $1,500.
Supplies You Use Day-to-Day Count Too
The supplies you purchased for your business -- like paper, software, and even snacks for customers -- may also help lower your tax bill.
Equipment You Use
If you purchased a computer or other equipment, like a tablet or cell phone for your business, you can take a deduction in the year you purchase it if it was used exclusively for business. Up to $500,000 worth of equipment is eligible for immediate expensing in the tax year you bought it.
Education Expenses
Even though you’re your own boss, there’s always room to learn and grow. If you are taking courses or buying research materials to be more effective, you may be able to deduct these expenses from your business income. Expenses like books, online courses, college courses, and other materials -- like trade publications -- can be easy to forget. But these can be valuable deductions, lowering your business costs.
Health Insurance Premiums
If you are self-employed, you may feel lucky when it comes to this tax deduction. You can deduct what you pay for medical insurance for yourself and your family -- whether you itemize or not and without regard to the 10 percent threshold (7.5 percent for those 65-years and older).
Social Security and Medicare Taxes Paid
If you are self-employed, you do have to pay the entire 15.3 percent Social Security and Medicare tax, since you don’t split it with an employer. But there is a bit of a reprieve since you get to write off half of what you pay.
In order to maximize your deductions and keep track of business expenses, we recommend you use
QuickBooks Self-Employed, which has a special deal through
PayPal for 50 percent off (
terms apply). QuickBooks Self-Employed tracks and categorizes your total income and expenses year round so you know your total profit and you can discover tax deductions automatically that you didn’t even know about! When using QuickBooks Self-Employed with the TurboTax bundle, your business income and expenses are exported automatically to your schedule C for easy, effortless tax filing.
There’s no need for you to know tax laws and tax forms. You can use
QuickBooks Self-Employed to track your business income and expenses, estimate your quarterly taxes, and your information can easily transfer to TurboTax in time to make the tax deadline.
Good luck entrepreneur!