Unexpected Tax Deductions on Self-Employed People (Photo: Apartment Therapy)
Working as a freelancer can be difficult. Aside from the unpredictability of your earnings, you will be denied certain benefits that a major employer can provide, such as health insurance.
The IRS, on the other hand, regards freelancers as business owners. This means you can take advantage of a slew of tax breaks that you might think are only available to large corporations. Here are some of the unexpected tax deductions you may be eligible for as a self-employed person, including a few that may surprise you.
Interest in a Business Loan
The interest you pay on money borrowed for business purposes is tax deductible.
Surprisingly, this also applies to business expenses incurred with a credit card. If you use a business credit card and keep your costs physically separate, it will make your life much easier during tax season. However, you can claim these unexpected tax deductions if you identify which purchases and interests are specific to your business.
READ ALSO: Write-Offs on Your Taxes: Learn More About It
Unexpected Tax Deductions on Self-Employed People (Photo: SoFi)
Deduction for Home Office
If you work full-time and use a private room in your home for business purposes, you can claim a home office deduction for that portion of your home. Remember to designate a specific area of your home for business purposes and limit your deduction to that area only.
Premiums for Self-Employed Health Insurance
If you are a freelancer and do not work for another company, you will most likely be responsible for paying your health insurance premiums. While this is undoubtedly one of the disadvantages of freelancing, a tax break is waiting for you.
The IRS allows freelancers to deduct all self-employment health insurance premiums, including those for family members.
Vehicle Use for Business
You should drive your car to work at least some of the time, depending on your work type. This means you use your vehicle for business purposes, which allows you to have other unexpected tax deductions.
Half of Self-Employment Taxes
Another significant disadvantage of working for yourself is that you must pay the employer and employee portions of your Social Security taxes, totaling 15.3% of your income. However, you can claim a tax deduction for half of your pay.
READ ALSO: Here Are Ways To Boost 2023 Tax Refunds Even Without Itemizing Deductions
