Important Tax Deductions for Self-Employed Workers: Save Big!

Tax Deductions: Are you a self-employed worker looking to maximize your tax savings?

Understanding important tax deductions can make a significant difference in your financial health. This post will explore key deductions like the Home Office Deduction and Health Insurance Premiums to help you keep more of your hard-earned money.

Home Office Deduction

The home office deduction can be a significant tax break for self-employed workers. If you use a portion of your home exclusively for business purposes, you may be able to deduct related expenses. The space must be your principal place of business or a location where you regularly meet clients or customers.

To qualify, the area should be used solely for business activities. It can’t double as a personal space. You can deduct a percentage of your mortgage interest, rent, utilities, repairs, and depreciation.

Calculating the deduction: There are two methods to calculate your deduction: the simplified method and the regular method. The simplified method allows a standard deduction of $5 per square foot of home used for business, up to a maximum of 300 square feet. The regular method involves calculating the actual expenses of your home office based on the percentage of your home used for business.

The home office deduction can be a huge benefit, so make sure to maintain accurate records of your expenses to substantiate your claim should you face an audit.

Tax Deductions: Health Insurance Premiums

Health insurance premiums are a significant expense for self-employed workers. Fortunately, the IRS allows you to deduct the cost of these premiums from your taxable income. This includes premiums paid for yourself, your spouse, and dependents.

Eligibility Criteria

To qualify for this deduction, you must not be eligible for employer-subsidized health insurance through another job or your spouse’s job. In addition, the health insurance plan must be established under your business.