BOSTON (CBS) – Self-employed individuals do get some decent tax breaks. Maybe not as many as the big guys but take advantage of as many as you can.
You can claim a 100% deduction for your health insurance costs. This is a very expensive item in anyone’s budget. This deduction does not go on your schedule C but on the first page of the 1040.
If you make a capital purchase for your business you normally would depreciate it. That is, expense it over the life of the asset, usually 3 to 5 years. Small business owners are allowed to write off some of their equipment in the year they purchase it if they qualify for Section 179 Expenses. The limit for this year is $500,000.
So take the time to evaluate what your profit will be this year and what your business needs are. A computer, printer, a smart phone, office furniture, software, new equipment?
The deduction gets tricky for trucks and vans. No longer can you write the whole thing off if it can also be used for personal use. Certainly, a $10,000 saw for a woodworking shop would qualify for a full deduction.
If you are using your car in your business and do not itemize your expenses, the Standard Mileage Rate for this year is 56.5 cents a mile. This is the mileage rate for the cost of operating your car, van, pickup, or panel truck.
Don’t forget retirement planning; set up a SEP-IRA, Simplified Employee Pension Plan, for yourself and if you have employees you will need to include them as well. You can contribute up to 25% of your income with a limit of $51,000 for 2013. The business makes the contributions for you and your employees.
If that’s too much bother at least set up an IRA to shelter some of your profit this year. Limits are $5,500 for this year with a catch up provision of $1,000 if you are over 50! And you have until you file your tax return next year.