When you work for a traditional employer, your employer will deduct taxes out of each check that you get. If you work for yourself though, you’re responsible for paying your own taxes each year. The Internal Revenue Services recommends that you pay your estimated taxes at different points during the year to avoid any surprises at tax time. Taking advantage of deductions can help bring down the total amount that you owe by a significant amount. You may have the chance to make deductions for things you never considered before too.
The IRS allows you to deduct expenses relating to a home office. This must be an actual room in your home that you use just for your business. You can measure the size of the space and compare it to the size of your home, or you can take the standard deduction the IRS offers, which lets you deduct $5 for every square foot of your office. You can deduct expenses relating to that office too, including a portion of your rent or mortgage as well as your utility bills and internet bills.
If you use your car for your business, you can deduct some of the costs of owning and maintaining that vehicle. The IRS lets you deduct a set amount for each mile that you put on your car for business purposes. You’ll need to keep track of that mileage and write down each mile that you drive for work. Those who are self-employed can also deduct a portion of maintenance costs such as paying for oil changes and get other routine work done. You may even deduct the cost of new tires or other repairs that your car needs.
You can deduct the cost of your cell phone but only if you have a dedicated cell phone for work. The IRS does not let you deduct the cost of your personal cell phone, even if you use that phone for work purposes. Looking at business mobile phone plans will help you see the cost of getting a separate line. This helps you separate your clients from your family and friends. You can deduct the total cost of the new phone and your monthly bill from your taxes too. These deductions for the self-employed help you save money and owe less when filing your taxes every year.