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.
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.
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.
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.
Lainie Petersen writes about business, real estate and personal finance, drawing on 25 years experience in publishing and education. Petersen's work appears in Money Crashers, Selling to the Masses, and in Walmart News Now, a blog for Walmart suppliers. She holds a master's degree in library science from Dominican University.