Patton Bookkeeping

Another satisfied client!

Official countdown has begun: The tax deadline is exactly 1 week from today.

Monday, April 15th is fast approaching (21 days)! Don't forget to request an extension!!

Self employed tax benefit #5

5. Self-Employed retirement plans. Contributions to self-employed retirement plans are tax deductible. This include retirement vehicles such as SEP-IRAs, solo 401(k)s, Keogh plans, and SIMPLE IRAs. In 2023, you could contribute up to $66,000 to a solo 401(k).

It really pays to be self-employed when it comes to retirement deductions. Be sure you're taking full advantage of your opportunities!

Self employed tax benefit #4

4. Entertainment and meals. This expense is only deductible at 50%, but includes things like tickets to sporting events and the cost of a round of golf.

PLEASE NOTE:

You must be with a client or business partner and discuss some business, but this deduction can be used frequently with a little planning.

UPDATE:

For tax year 2023 and onward meals have reverted back to 50% deductible and Entertainment expenses, like sporting events or show tickets, are non-deductible. Team-building activities or a companywide party for employees, on the other hand, are deductible. The standard reverts back to how it is defined according to the Tax Cuts and Jobs Act.

Self employed tax benefit #3:

3. Automobile. This is a nice deduction that can really add up. You have 2 options available:

* Standard Mileage method: In this case, you would simply keep track of the number of miles you drive for business related purposes. Then simply multiply the number of miles by the mileage rate provided by the IRS.

* Actual Expense method: You will have to determine the percentage of your mileage that was spent on business and then multiply that percentage by the total expenses related to your automobile. This would include, gas, repairs, oil changes, and more.

* Which method is best? The one that gives you the greatest deduction is best. In general, if you have an inexpensive car or a car that is paid off, then the standard mileage method is best.

PLEASE NOTE:

You cannot switch between methods. Once a method is chosen the first year, you must consistently use the same method. If the actual expense method is chosen the first year, then it is possible to change methods to standard mileage the following year. Once standard mileage is chosen, you cannot change it.

Self employed tax benefit #2:

2. Health insurance premiums. While this is technically a personal deduction, it is only available to the self-employed. In a nutshell, if you're self-employed and not eligible to enroll in your spouse's health plan, you can deduct your premiums from your income. This would include health, dental and long-term care insurance.

* This also applies to premiums paid for your spouse and dependants.

Tax Advantages for the Self-Employed

There are some great advantages to being self-employed. Being self-employed allows for plenty of opportunities to minimize your taxable income by turning expenses you would have even if you weren't self-employed into tax-deductible business expenses. Stay tuned as I delve into several of the advantages.

There's a better way than allowing ol' Uncle Sam to hold your money all year, interest free...