Don’t Forget These Tax Deductions If You’re Self Employed Max It Out Retirement

Itemizing your taxes is a hallmark of the self-employed life, so we’ve got a few tax planning strategy hacks that you may want to consider, especially if you’re headed toward your retirement in the next few years.

Know the rules for expensing and depreciation

For items you buy for your business, you have two options: either you can deduct the cost of your expenses immediately, or you can deduct the cost over the lifespan of the thing you’ve purchased for your business. The “lifespan” is determined by the IRS.[1] Most people want to deduct things immediately, and each year, you can deduct up to $1.16 million in equipment instantly.[1] The only time this isn’t true is if you’ve put 2.89 million dollars’ worth of items into service that year, in which case the amount you can deduct instantly is decreased.[1]

You may be able to deduct your medical insurance premium

These rules change depending on the circumstances, but it is possible that you can deduct the cost of your medical insurance premiums from your income for the year. To qualify for this deduction, you must not have access to any employer-sponsored medical insurance (including one that a spouse might be able to give you), among other qualifications.[1]

Take advantage of tax-advantaged retirement accounts

This isn’t actually a deduction per se, but as a self-employed person, you have access to several useful retirement account options that may allow you to control your taxes favorably.[1] Consider options like a simplified employee pension or a solo 401(K). These kinds of accounts may offer you the ability to contribute more to your retirement accounts than other accounts might.

Also, if your income is low enough, then you may qualify for a Saver’s Credit. This is an additional deduction meant to incentivize retirement saving for self-employed people.[1]

Consider a financial professional

When it comes to tax planning services (especially self-employed itemization), there are many, many minute rules that you could easily overlook. If you’re looking for someone to help you find the tax benefits you might otherwise be missing out on, consider reaching out to one of our professionals today for a complimentary review of your finances.