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Tax Advantages for the Self-Employed
There are many tax advantages to being self-employed. The federal
tax code is extremely generous to small-business owners. Most
states also offer tax advantages in terms of deductions and sometimes
even tax credits.
Home Office Deduction:
The home office deduction is perhaps the biggest tax benefit
you will see with your home business. It allows you to deduct
as a business expense the costs of operating and maintaining the
part of your home that you use for business. For example, a room
can be used as a tax deduction if you run your business out of that
room in your home.
Other deductions related to running your business at home are your
phone calls and some indirect business expenses such as heat, electricity,
housekeeping, security system, household supplies, trash collection
and association fees.
Other Deductions:
The self-employed person can also deduct items used exclusively
for business. In some states, you can deduct a portion of costs
for services that are not used exclusively for business, such as
a percentage of the costs of internet service for business and personal
use.
Other deductions you may be able to take advantage of include:
phones, answering machines, fax machines, postage costs, health
insurance, auto expenses, business travel, office furniture, tuition
for business-related classes, retirement plans, and interest on
business-only credit cards.
Yet another tax benefit can come in terms of hiring your family
members. By doing this, you can literally shift income to a
lower tax bracket. This lets you shift some of your earnings to
other family members, meaning you pay less tax and the family members
get money you probably would have given them anyway.
References:
Kaeter, Margaret. (2003). Everything Network Marketing Book.
Avon: MA. Adams Media Corporation.
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