As a Freelancer or Self-employed individual for your tax computation purposes, you are allowed few of the deductions. Are you aware of these top 10 tax deductions for the Freelancers and Self Employed?
Top 10 Tax Deductions For The Freelancers And Self Employed:
1. Workspace Expenses
The office that your own or rent is a part of business expenses. The workspace expense is deductible from your taxable income.
If you have home office, then things get little complicated. You can deduct home depreciation, interest, insurance, property tax and home maintenance paid during the year. All this in proportion to number of square feet space you occupy exclusively for your business from your taxable income.
It's important to keep accurate map of your office space ready in case you have to show it to the tax authorities.
2. Internet & Phone
While filing the tax return, you can claim your business phone, fax, and internet expenses. The key is only to deduct the expenses directly related to your business, so it is better to have a separate phone line and internet line for business.
3. Health Insurance Premium
Health Insurance premiums are deductible while calculating taxes for freelancers & self-employed individuals. The deduction also includes premiums paid for young spouse and children.
A meal is a tax-deductible business expense when you are traveling for business or entertaining a client. You should keep all receipts of the meals consumed.
You can deduct business travel expenses while filing tax. A business trip must be a planned trip specifically for business purpose and should be outstation trip.
Keep proper records and receipts of travel expenses. 100% of your travel expenses for business are deductible, except for meals and entertainment, which are limited to 50%.
In some countries, you can deduct 50% of your business entertainment expenses considering that you are spending it with the person you are conducting a business. Be careful though there are several restrictions on this deduction. Keep all records and receipts properly.
If you spend on education and skill improvement necessary for your business, then such expenses would be tax deductible.
The cost of specialized magazines, journals and books directly related to your business is tax deductible.
Interest on a business loan from a bank is also a tax-deductible business expense. The interest on your credit card is tax deductible when the purchases are made for business purpose only.
10. Car or Vehicle
When you use your car or any other vehicle for business, your expenses for those drives are tax deductible. Make sure to keep excellent records and don’t try to claim personal trips as business trips.
Though most of these tax deductions are standard and available in most of the countries, you may still want to check with your local tax consultant before you claim any of them.
Do you know any other tax deduction, which can help other freelancers or self-employed individuals, please add them in comment section?
Quick Note: If you are using ShimBi MyBilling, you can download several reports to include in your tax return.