Here’s an answer to “The Most Commonly Asked Self-Employed Tax Question.” But first, do you know what that question is?<\/p>\n
Here it is: What’s deductible?<\/p>\n
That’s it. Without a doubt, it’s the most common tax question I receive every year. It comes in several forms, such as:<\/p>\n
How do I identify all the tax deductions I’m allowed to take?
\nIs there anything deductible that I’m not deducting?
\nHow do I make sure I’m taking all legal deductions?
\nIs there one resource that describes all legitimate self-employed tax deductions, A to Z?<\/p>\n
Knowing all allowable self-employed tax deductions is no easy task. Our beloved politicians have done much to complicate our lives in this regard.<\/p>\n
Any long journey begins with a single step, so here’s where you can start learning what’s deductible: your income tax return. Go to the IRS website right now and print out a copy of Schedule C and take a close look. Here you’ll find a list of about twenty deductible business expenses.<\/p>\n
To get a current copy of Schedule C, go here: Schedule C is divided into 5 sections (Parts I-V). Part I is labeled “Income” and Part II is labeled “Expenses”, so you would think the best place to start is Part II, right? Well, if you don’t sell a product, you are correct. But if you do sell a product, take a close look at Part I because this is where you deduct what’s known as “Cost of Goods Sold” on Line 4.<\/p>\n For retailers, this is probably your largest expense. You get to deduct your wholesale cost of all products sold during the year. Part III of Schedule C (Lines 33 through 42) contains the details of how this expense is calculated, and the amount from Line 42 is transferred back to Line 4.<\/p>\n So that’s your first and potentially biggest deduction, if you sell a product.<\/p>\n Now let’s move on to Part II. Take a good look at Lines 8-27. This section of Schedule C is a literal goldmine of deductions in alphabetical order. Here they are, with the corresponding Schedule C line number:<\/p>\n 8-Advertising Take special note of that last expense, Line 27, “Other expenses”. That’s my favorite! This is where you can deduct any other legitimate business expense that’s not included on the other lines. In fact, Part V is devoted exclusively to this “Other Expense” category, and the IRS expects you to have any number of business expenses listed here, which are added together on Line 48 and then transferred back to Line 27.<\/p>\n So there you have it — a great way to know what’s deductible is to start with Schedule C. It’s as easy as that.<\/p>\n","protected":false},"excerpt":{"rendered":" Here’s an answer to “The Most Commonly Asked Self-Employed Tax Question.” But first, do you know what that question is? Here it is: What’s deductible? That’s it. Without a doubt, it’s the most common tax question I receive every year. … Continue reading
\nhttp:\/\/www.irs.gov\/pub\/irs-pdf\/f1040sc.pdf<\/a><\/p>\n
\n9-Car and truck expenses
\n10-Commissions and fees
\n11-Contract labor
\n12-Depletion (OK, there’s a rare one)
\n13-Depreciation and Section 179 deduction
\n14-Employee benefit programs
\n15-Insurance
\n16-Interest
\n17-Legal and professional services
\n18-Office expense
\n19-Pension and profit-sharing plans (OK, another rare one)
\n20-Rent or lease
\n21-Repairs and maintenance
\n22-Supplies
\n23-Taxes and licenses
\n24a-Travel
\n24b-Meals and entertainment
\n25-Utilities
\n26-Wages (if you have employees)
\n27-Other expenses<\/p>\n