Self-Employed? Get The Most Out Of Your Deductions.

The combined income tax rate in Pennsylvania is almost 34% for people who are self-employed. That is a lot considering that much of what is spent can be saved using sound, lawful deductions. Many deductions are not being taken due to apparent ignorance, fear, and incompetence. Many business owners today are not taking full advantage of the deductions offered to them. Outlined here are a few of the ways to lessen the amount of money you pay to the IRS.

One of the best ways to increase the amounts of deductions you can take is to set up a home office. By doing so, you can deduct parts of the house that would not be deductible otherwise. For example, if you were to create an office that was 20% of your total household, you would be able to deduct 20% of utilities, insurance, repairs and even depreciation. The catch is that the office in your home must be used only for work purposes and must be the primary place you conduct business.

There are many deductions that must be depreciated. But the tax-smart savings strategy you never overlook is section 179. This IRS section allows you to expense the entire cost of assets in one year up to $20,000...SO if you bought computers, office furniture, or other business equipment, always employ section 179 for maximum deductions. Regarding inventories, mark down the slow moving items so the business can take a write-off now. To secure the deduction, mark the items down now so they can be sold at a loss. Also, use of LIFO vs. FIFO inventory methods can be beneficial but you must get approval when you file.

If at all possible, buy a sport-utility vehicle (SUV) for business purposes that weighs more than 6,000 pounds. The Tax Code restricts depreciation deductions for cars weighing less than 6,000 pounds, but it doesn't restrict deductions for cars weighing more. By purchasing the SUV, you can get thousands of dollars in deductions for depreciation as long as it is used primarily for work. Furthermore, office computers and other electronic equipment can be deducted. Employees are required to document use and can deduct a portion of the cost. But if you purchase the equipment and provide it for the employees, deduct the full cost.

In owning your business, you have many advantages over bigger companies. For example, by employing family members, you can reduce your income taxes greatly. Children, grandparents and other family members in low tax brackets can deduct their compensation at the business' high-tax-bracket rate. Another advantage of being self-employed is the opportunity to deduct 100% for self-employed taxpayer's medical insurance. Take the deduction as an "Adjustment to Income".

For more information call Geoff at: CALL 1 (800) 462-8297.