There are a host of tax deductions available to self-employed individuals that can generate real savings when filing your tax return. As you prepare to file your taxes this year, here are a few deductions you should be mindful of:
Home office expenses: If you’re using an area of your home regularly and solely for business, you may be able to deduct expenses for a home office from your taxable business income.
PPP expenses: If you received a PPP loan either in the first or second round of funding, certain businesses expenses paid with those funds can now be deducted.
Office supplies: Hang on to those receipts for pens, paper, and printer ink as you’re eligible to deduct the total cost of your office supplies.
Social Security: Remember that if you are self-employed, you will be paying more Social Security taxes than if you were on the payroll of another company. You can, however, deduct half of these taxes on your return.
Vehicle Expenses: The pandemic may have wiped out conferences and reduced the number of miles traveled for most people, but that does not mean you shouldn’t take advantage of existing deductions available to you. If you use your vehicle for business, you can still deduct either the actual expenses or the standard mileage rate of 57.5 cents based on the business use of the vehicle.
Section 179: This allows business owners the opportunity to deduct up to the full cost of capital assets — like furniture, equipment and technology — immediately rather than depreciating them throughout their use. Any unused deductions can be carried forward and put toward next year’s tax return.
Meals: The stimulus bill passed in December changed the deduction for meals, allowing businesses to now take a 100 percent deduction on all meal expenses for 2021.
Curious about what deductions you might be eligible for this year? At Padgett, we have a talented network of CPAs, Enrolled Agents and tax professionals who can help you navigate the confusing world of filing your taxes. Contact our office today and let’s set up a time to talk.