10 Things Self-Employed Taxpayers Can Write Off for Savings
Tax time is here, and if you work for yourself, you can lower your tax bill by writing off a bunch of business-related expenses. When it comes to saving money and staying in the good graces of the Internal Revenue Service, the name of the game is meticulous documentation, receipts, logs, and records. A word to the wise: Be honest about what you actually use for business purposes and speak with an accountant just to be sure.
Most self-employed taxpayers can write off not just their own health insurance premiums but those of their spouse and dependants, as well -- whether they itemize deductions or not. The only requirement is that they cannot be eligible for coverage under a spouse's employer's plan. The deducted amount cannot exceed the total earnings of the business.
If you own property used to generate income, you can write off its depreciating value, provided you own it for more than one year. This could be a computer for a writer or a gas-powered generator for a contractor. The IRS requires an estimate of the property's useful life span and the amount of time you will be able to use it to generate income.
The grandaddy of all write-offs: retirement account contributions. Self-employed taxpayers can lower their current tax bill by contributing to a Simplified Employee Pension Individual Retirement Arrangement, which has higher contribution limits than a traditional IRA. SEP-IRA contributions made before the tax-filing deadline can be applied to the previous year. Another option is a solo 401(k) retirement account. Taxpayers may need to apply for a federal Employer Identification Number -- a quick, online process -- to open an account. The paperwork can be a bit complicated, but like a SEP-IRA, a solo 401(k) lets individuals defer more money than a traditional IRA. The taxpayer must set up an account and elect to make a contribution by Dec. 31, but funds needn't be deposited until the tax-filing date (April 18, or Oct. 18 with an extension).
Raechel Conover contributed to this story.