Freelancers should know that there are several tax deductions they can take advantage of while using their residence as their place of business. Nobody understands more than the entrepreneur how important every dollar can be, so each one that can be put back into the business is going to be beneficial in the long-run. The other oversight by many small-business owners is the fact that the U.S. government wants to encourage small businesses and generate money that will go back into the economy, so it’s in their best interest to provide incentives to help people do just that.
Standardized vs Itemized
A tax deduction is a discount subtracted from any taxable income, which then reduces the amount ultimately owed to the government. There are many things that qualify, but for the freelancer, there are a few major ones that shouldn’t be overlooked. There are two types of tax deductions. The first kind is standardized, which is a set, fixed amount. The second is itemized, which is more of an à la carte selection of deductions that are not normally found on a personal tax return.
Home Office Deductions
The first thing to remember is that your home office is now officially an office, in the legal sense. If you qualify for a home office deduction, you get to subtract expenses related to your business that pertains to your office space in your place of residence. This deduction is effective even if you don’t own your home. You can be conducting business out of a rental property and still benefit from this.
It may not seem like it, but driving your car is another way you can save some money through tax deductions. Although commutes do not qualify, any errands throughout the day that relate to your business do count as business travel and can, therefore, be deducted.
Many freelancers don’t realize how many deductibles are perfectly legal to declare. Dining is one area, for example. When you go out to eat, if you are discussing business, it can be deducted as a business meal. When you are traveling, it is legal to deduct travel expenses as long as business-related matters take up more than 51% of the day, for each day you are away.
In addition, although regular seminars are not deductible, specific ones that help you grow your business can be, since they can fall under the category of continuing education.
Visit Morris Invest to learn more about building wealth, getting rid of debt, and taking control of your finances, family, and personal well-being!