Tax Deduction for Self-Employed Individuals in Arizona
Income tax filings are one of the most complicated tasks every earning individual has to engage in. However, a breath of relief is tax deductions which allow one to reduce their taxable income from various expenses and investments undertaken by the taxpayer. In the case of self-employed individuals, some additional benefits can be explained by an advisor offering the best Phoenix, Arizona tax advisory services.
It is always recommended to consult a tax advisor as the inaccurate tax deduction can catch the IRS’s eye, which would involve a lot of time and resources, even if one is clean. Therefore, it is essential to gain efficient knowledge about all the possible tax deductions before a self-employed individual files the tax.
Self-Employed Tax Deductions:
The responsibility of payment of half of an employee’s Medicare and social security is paid by the employers, but in the case of self-employment, there’s no such scenario, as there is no involvement of an employer, the responsibility of the entire amount goes to the self-employed individual. But this also comes with tax benefits as one’s employer portion is considered by IRS as a business cost. This allows one to reduce half of the self-employment tax from one’s net income. These deductions include:
Home Office Deduction:
This involves calculating the cost of the physical space used by one for the business purpose and the operational cost of the space. For example, if the office established at one’s home is 20% of the entire house’s square feet. One can deduct that 20% from home mortgage interest, home insurance, utilities, depreciation, and repairs done in a year (if any).
Tax Deduction from Health Insurance:
The payment of health insurance goes out of the pocket of the self-employed individual. Moreover, there is no group plan involvement, so the premium tends to be higher. The entire cost of the health insurance is deductible, provided one is not eligible in someone else’s plan.
Meals and Travel Deductions:
If one travels for business, meals are tax deductible and considered business expenses. Travel expenses are also deductible if the business trip includes more than one working day. In such cases, one needs to cite a purpose for the business-specific trip to avoid the flaming eye of the IRS.
While there are numerous other provisions for a tax deduction for self-employed individuals, such as business insurance, rental cost for commercial property, advertisement costs, contributions to retirement savings, and many more, all these pieces of information can be well provided by a tax advisor.