Tax Saving Tips for the Self Employed

by Lainie Petersen, Demand Media Google

    Don't pay a penny more in taxes than you have to. If you're self-employed, you can deduct many business expenses from your taxes; you can deduct even more if you have a home office. Of course, it's always a good idea to talk to a tax professional about your tax issues, particularly if you run your own business.

    Separate Accounts

    Don't pay your personal and business expenses from the same checking account. While keeping your business and personal funds separate does not itself cut your tax liability, it makes it a lot easier for you, your tax preparer or your accountant to claim deductions and credits. Plus, if you ever get audited, separate accounts make it easier for you to document and defend your tax return.

    Separate Rooms

    If you do business from your home, you can deduct the cost of that space from your taxes, as long as you use the space and its equipment exclusively for your business. Your costs include things like rent, mortgage, insurance, heat and electricity. Figure out how much to deduct by dividing the size of your dedicated work space by your home's total square footage, according to Dana Dratch in her article “A Dozen Deductions for Your Small Business” at Bankrate.com.

    Appreciate Depreciation

    Depending on your tax needs, you can either deduct the full cost of office furniture and computers in the year you buy them or make deductions over several years based on their declining value. The IRS provides charts for calculating depreciation, and a tax preparer can help you decide which tax strategy is best for you.

    Social Security and Health Care Expenses

    If you're self-employed, you have to pay into Social Security and for your own health insurance. You can deduct half your Social Security taxes when filing your tax return. If you aren't eligible for health insurance through an employer, including your spouse's employer, you can deduct the cost of your health insurance premiums from your taxes. You can even deduct, at least partially, insurance premiums for things like long-term care.

    About the Author

    Lainie Petersen lives in Chicago and began writing professionally in 1989. She covers careers, consumer issues and business for several online publications. Petersen holds a bachelor's degree in philosophy from Illinois State University and a Master of Library and Information Science degree from Dominican University.