Another great category is health insurance. The self-employed can be able to deduce premiums for them and their family members as long as they are not eligible for employer-sponsored coverage (even through a spouse).
Some gray areas
A variety of deductions tend to confuse taxpayers because the rules are more nuanced or apparently subject to interpretation. And when taxpayers visualize a possible audit, "they rationalize their expenses as if they were talking to an assistant principal of the elementary school," Garafolo added. "And they don't realize they will talk to a homicide detective."
What tax exemptions make taxpayers stumble more frequently? If you have a lunch related to working with a client, for example, you can generally deduct half of the bill, provided that food It is "reasonable based on facts and circumstances" and not "luxurious or extravagant." But you cannot cancel a round of golf with a client.
Another difficult situation arises when holidays are mixed with business trips. If you have only one concert to talk during a week's vacation, you cannot deduct plane tickets. But if you have added a couple of days to do business, you can deduct your hotel, car rental and half of your meals during those two days. Airline tickets are deductible when the main purpose of the trip is related to work.
Transportation expenses – say, a 20-mile trip to meet customers – can also be deductible and can be accounted for In a couple of ways To drive, you can usually take the standard mileage deduction or actual expenses to operate the vehicle (lease payments, insurance, gasoline, oil) depending on the relationship between commercial and personal use. Track and document both, then claim the biggest deduction.
Contributions to individual retirement accounts with tax advantages, such as traditional I.R.A.s and Simplified Employee Pension, or SEP, I.R.A.s It can also be deductible. SEPThey are often the best option because freelancers can contribute much more than with an I.R.A. Traditional, said Dina Pyron, a partner at Ernst & Young who oversees the company's EY. TaxChat file service
An additional bonus
Many people who are self-employed may be eligible for a tax exemption enacted as part of the 2017 tax law. It allows those with so-called passing entities – that is, your business income is transferred to your personal statement – to deduct up to 20 percent of qualified business income.