If you have a dedicated space in your home from which you conduct business, and only business, you may be able to claim a home office deduction. IRS Publication 587 offers specific guidelines on eligibility and calculations. A portion of your rent or mortgage, utility costs, repairs and maintenance may be deductible. You can either take a deduction of $5 per square foot, up to 300 square feet, or the deduction can be based on the percent of square feet your office space claims (10 percent of total square footage would mean deducting 10 percent of your rent, for instance).
If you use your vehicle to travel to client meetings, make deliveries or take care of other business-related tasks, you can deduct associated expenses. One option is to track business miles and deduct 54.5 cents per mile for 2018 (58 cents in the 2019 tax year) to account for gas as well as wear and tear on your vehicle. Another option is to claim deductions based on actual costs for fuel, maintenance, licensing and depreciation. In either case, keep meticulous records and receipts, and always designate between business and personal use.
Qualified self-employed individuals may be able to deduct the cost of health insurance premiums for themselves and their families. IRS Publication 535 spells out requirements when preparing 2018 returns. Generally, if you are eligible to participate in an employer-sponsored plan – whether through a second job or a spouse’s job – this deduction is not available.
This tax deduction – new for 2018 – is aimed at helping small businesses with pass-through income, or income that is subject to individual tax rates. Known as the section 199A deduction, it allows eligible taxpayers to deduct up to 20 percent of qualified business income earned from a sole proprietorship, partnership or S corporation, and the IRS has issued some guidance on the complex rule. Limitations apply once taxable income surpasses $315,000 for a married couple or $157,500 for all other taxpayers.
When you’re self-employed, you have the privilege of paying Social Security and Medicare employment taxes twice – once as the employer and once as the employee. To avoid this double taxation, you can deduct 50 percent of your payment, or the employer contribution, in your tax filings.
As a self-employed individual, you can establish a retirement plan for yourself and set aside earnings pre-tax, just as an individual participating in a workplace 401(k) would do. Self-employed individuals have options including an IRA (traditional or Roth), SEP IRA, SIMPLE IRA or Solo 401(k). Visit irs.gov for details on contribution limits.
Growing your business means keeping up with developments in your industry, and continuing education doesn’t come cheap. If you are taking seminars or courses related to your present business, or paying subscriptions or annual dues to professional associations, those expenses may be deductible. Only expenses directly related to enhancing skills and knowledge in your current profession are eligible; classes you take to pursue a hobby or a career change are not.



