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Self-employed individuals always cringe at the amount of taxes the pay to the IRS and state. Here are tax strategies for self-employed individuals that reduce those tax amounts.

Tax Refund Schedule

Tax Strategies

The good news is being self-employed is one of the best tax strategies out there. Unlike a salaried employee, the full scope of tax credits and deductions available in the tax code are now available to you. The key, of course, is understanding the available deductions and organizing your business in a manner that allows you to maximize the write-offs.

The number one tax strategy for self-employed individuals is to keep receipts for every business expense and write them off. Practically anything can be deducted, so do it. Acceptable expenses include cell phone usage, business mileage, office supplies, home office deductions including part of mortgage or rent and so on. If you’ve filed a tax return while self-employed, you are probably already aware of this so lets move on to more specific tax strategies for self-employed individuals.

Maximizing you non-capital losses can result in major tax savings. If your expenses exceed your income for a year, you obviously will not have to pay taxes for that year. What most people don’t realize, however, is that such losses can be carried forward for seven years and deducted against future income. Alternatively, the same losses can be carried backward three years to recover past taxes paid. The end result of this situation is you can turn a bad business year into an income generator by applying the losses to taxes in other years which effectively wipes out your tax bill for those years.

When Will I Get MyTax Refund?

Another tax strategy is to look at your side businesses. If you have one business, you’ll often have a second one that is tailored to making some money off a personal interest. While you are in it mostly because you like it, you may not realize it qualifies as a business and can help you reduce your taxes. Let’s assume you are primarily a self-employed consultant, but also write travel articles on the side. You may view the travel articles as a hobby, but it is in fact a business. If you’ve sold or even tried to sell any of your articles to a publication, all of your expenses related to travel writing can be deducted from your taxable income. This includes trips and so on. These, deductions can significantly reduce your taxable income from the consulting business. Make sure to get a grasp of your overall business efforts, even if you don’t really consider them to be a business.

Consider employing your children to save on taxes. A child under 18 that works for you does not have to pay FICA and so on. If the total wages for the year are under $4,250, they will pay no taxes and you can write off this amount as a legitimate business expense. Of course, the child needs to actually be doing a legitimate business task, but filing and similar manual tasks certainly will qualify.

Tax Rate Schedule

Tax strategies for  the self-employed are plentiful. If you are self-employed, consider getting professional help. A good professional will save you thousands upon thousands of dollars in taxes, more than making up for their fees. Oh, you can also deduct their fees!

Tax Deduction For Homeowners

We will start off with the basics and then get into actual numbers. First of all we start with a filing status category. We have a few to choose from. The filing statuses are; Married filing jointly or Qualifying widow(er) filing status, Married filing separately, Single filing status, and Head of household filing status.

Filing Taxes Using Federal Income Tax Standard Deductions

Single Filing Status

Okay if you are in single the tax bracket, the tax rate can go from 10% to 35% depending on your income. We start out at 10% with an income between $0 and $8,350.

The rate is 15% for and income between $8,350 and $33,950 plus $835. As the income increases so does the tax rate and so does the added amount. The top bracket which is 35% is for an income over $372,950 plus $108.216.

Married Filing Jointly or Qualified Widow (er)

Now for this filing status we also have the tax rate that goes from 10% to 35%. The rate of 10% applies to an income from $0 to $16,700. The rate of 35% applies to an income over $372,950 plus $100,894.50.

The Alternative Minimum Tax (AMT) May Be Sneaking Up On You! 

Married Filing Separately

For this filing status we also have the tax rate going from 10% to 35%. I might as well tell you now all of the filing statuses have the tax rate going from 10% to 35%. For married filing separately we start at 10% for an income between $0 and $8,350. The 35% tax rate is for an income over $186,475 plus $50,447.25.

Head of Household

The head of household filing status is for people who own their own business. We start out at 10% for an income between $0 and $11,950. The 35% tax rate is for an income over $372,950 plus $104,892.50.

Finding Your Tax Bracket

If you would like help finding your tax bracket I suggest you visit Turbo Tax Online. Their software is so easy to use you won’t believe it unless you give it a try. The good news is you can try for free.

Federal Income Tax Medical Expenses Deductions

You don’t have to pay unless you decide to file your tax return. If you can answer simple questions about your life and the income you earn then, you will be able to use the TurboTax Online tax preparation software with no problems at all.

You are guaranteed the biggest refund or the lowest tax owed possible. Visit TurboTax Online today to discover even more benefits while using their software!