Being on your own is not only an antidote to the painful saga of working in cubicles and getting mired in corporate politics, but it also has other benefits – like favoring tax laws, for starters. Did you know that you have plenty of things going for you as a self-employed individual? From a strict tax-point of view, you have even more ways you to save on your taxable income. Let’s see how that is possible:

1.Tax-deductions for expenses towards Home Office: As a self-employed professional or business person, you are likely to be working out of your home. That qualifies for tax deduction (although it could be a little tricky to arrive at).All relevant expenses towards the space you must have made for yourself at home out of which you work regularly can be eligible for tax deductions. This tax deduction is based on the honor system and you are expected to be truthful and honest in this regard. It makes sense to preserve all your utility bills and be prepared for a likely audit on your taxes. Also, apportion the expenses appropriately.For instance, the percentage of electricity bills you claim to be using for business must be proportional.

2.Reading Is not Taxed: Did you know that purchasing or subscribing for books and magazines related to your businesses are tax-deductible? All of the bills you should have amassed over a year full of book and magazine purchases can be put under deductibles which can very well fund your passion for reading and empowering yourself with information, which enables you to do business better. Additionally, expenses towards any kind of course related to the line of work you are currently into is also eligible for a tax deduction. Of course, the class or course you are taking up should prepare you for a new line of work, provide more insight to help you do better in your business. For instance, if you are a writer, a course on “ writing for the web” will qualify, but not classes on French language.

3.Self-employed 401(K): This is probably one of the best tax-deductible a self-employed professional or a small business owner can boast about. This is a great way to save tax, rack up tax deferrals for long-term savings and investments. The latest tax code – as of 2009 – allows you to purse away 25% of your net income (capped to a max of $245,000) from your business/practice into a solo account. You can even add a $16,500 salary deferral to your Self-employed 401(k) or Solo 401(k) – together that’s a lot of money that is being saved.

4.Travel : As a solo business owner, you would have realized by now that you wpould eventually wear all sorts of hats – including that of a traveling salesman. There are benefits that come with this responsibility. All of your travel expenses, as related to your business, are deductible from your taxable income. The trips you took to meet clients, including the usage of your car and the resultant fuel, maintenance and even taxi costs can all be used to reduce your taxable income. Yet again, file away all your bills, flight tickets, etc., so that you are ready when questioned or asked for proof.

5.Insure Your Family’s Health (including yourself) and reduce taxes: As an employee, you couldn’t do much but as a self-employed professional or solo business person, the tax codes are in your favor. You may deduct all the expenses that go towards the payment of the premium for one of more policies for yourself and also for your spouse and other dependents. This way, you would doing your family a big favor and saving truck-loads of money.

Other Relevant Resources

Top 10 Tips for Self-employed

For U.S.

Tax Info Blog

If You Are Self-Employed

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