One of the biggest challenges that you face when starting your own business is figuring out how to handle your own taxes. You have to be mindful of this now, since you can no longer count on taxes being automatically taken out by an employer. If you are now one of 22 million self employed people and want to learn how to take care of your taxes, consider these four common tax deductions for self employed people.
Home Office Tax Credit
Because you will most likely need to carve out a work place in your home, you need to be sure that you let the Internal Revenue Service reimburse you. To do this, get the exact square footage of your home office, in relation to the measurements of the rest of the house. This ratio will allow you to determine how much of your mortgage or rent can be deducted. To be eligible, you must use that room of the house for business purposes only.
Access to a medical plan is something that employed people enjoy from the company. Since you are your own company, the Federal government will reimburse you for your medical coverage premiums. However, if you are married, you must be sure that you are not eligible to join your spouse's plan.
Every mile that you put on your car during the course of work purposes can be deducted. The Federal government will reimburse you a certain rate for the travel. The mileage rate for 2014 is $0.56. By that rate, you can get $56 deducted from your taxes when you travel 100 miles. Keep an accurate and consistent record book or file of each and every mile that you drove for work, so that you can protect yourself during an audit.
Pouring back into your community is also a great way to reduce the tax bill you will have each year. Even tithing 10 percent of your income as a self employed person will allow you to deduct majorly every year. Many people give, but don't keep accurate records of contributions. It is important to realize that the government will reimburse you, so that you can keep every bit of money that is yours when you file.
Take inventory of these four tax breaks, so that you and your tax preparation firm, like Tri-Check Income Tax Service, can work hard to get you a refund, or to reduce what you owe.