Self-Employed? Five Easy Ways to Lower your Tax Bill
If you’re like most small business owners, you’re always looking for ways to lower your taxable income. Here are five ways to do just that.
1. Deducting the Cost of a Home Computer
If you purchased a computer and use it for work-related purposes, you can take advantage of the Section 179 expense election, which allows you to write off new equipment in the year it was purchased if it is used for business more than 50 percent of the time (subject to certain rules).
2. Meal Expenses for Company Picnics and Holiday Parties
If you host a company picnic or holiday party–even if it is at your home–100 percent of your meal expenses are deductible. Prior to tax reform legislation passed in late 2017, 50 percent of your business-related entertainment expenses (with some exceptions) were generally deductible. Starting in 2018, however, entertainment-related expenses are no longer deductible. If you have any questions, please don’t hesitate to call.
3. Deduct $25 for Business Gifts to Associates
Don’t overlook the deductible benefit of business gifts during the holidays or at any other time of the year. As a self-employed individual, you can deduct the cost of gifts made to clients and other business associates as a business expense. The law limits your maximum deduction to $25 in value for each recipient for which the gift was purchased with cash.
4. Food Offered to the Public at a Trade Show
If you are a frequent trade show exhibitor (or you are in the business of “food”), you know that offering free food is a sure way to get people to visit your booth. Did you know it’s also a tax write off? Typically associated with a promotional campaign, food offered to the public free of charge is 100 percent deductible.
5. Minimize your Tax Bill by Funding a Retirement Plan
As a self-employed small business owner, there are several retirement plan options available to you, but understanding which option is most advantageous to you can be confusing. The “best” option for you may depend on whether you have employees and how much you want to save each year.
There are four basic types of plans:
- Traditional and Roth IRAS
- Simplified Employee Pension (SEP) Plan and Savings Incentive Match Plan for Employees (SIMPLE)
- Self-employed 401(k)
- Qualified and Defined Benefit Plans
To make sure you are getting the most out of your financial future, contact the office to determine your eligibility and to figure out which plan is best for your tax situation.
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