Tax Deductions For Self employed And Independent Contractors

More Tax Deductions For You

In a previous post I went over some tax deductions you can take if you are self employed or considered an independent contractor. In this post, I will go over even more tax deductions that you can take, and I will also touch on some tax deductions that you cannot take.

Also, remember that you have 3 years to amend a previous tax return. If you see some legimate deductions you have may of missed in previous years, it will be to your benefit to amend your returns, using form 1040X. Contact a local tax attorney or other professional tax preparer for help if needed. Also, here is the link to the IRS on amended returns. IRS Website

Interest Expenses: You can deduct interest that you accrue from debts during the tax year as long as the interest is related to your business. The loan must be used for a business expense. This is deducted on Schedule C

Legal and Professional Fees: Deduct fees for accountants, attorneys and your tax preparer for expenses related to your business. You cannot deduct fees paid to acquire business assets. These fees are added to the basis of the property.

Rent: Payments you make for property you do not own to operate your business are tax deductible. If you have equity in the property or will receive equity or title to the property, rent is not tax deductible. If you rent your home and use part of it as a place of business, you may be able to deduct part of the rent on form 8829. You also must meet the requirements for business use of a home.

Taxes: You can deduct a wide variety of federal, state, local and foreign taxes, as long as they are directly related to your business on Schedule C.

Deduct state income taxes on gross income that is a direct result of your business. Also, if you itemize your deductions, there are other state and local income taxes that can be deducted on Schedule A.

Employment taxes are tax deductible. This includes Social Security, Medicare and federal unemployment taxes.

Also deductible is the self-employment tax, which is deductible for independent contractors also. You can deduct one half of your tax on form 1040.

Personal property tax can be deductible. You can deduct this tax used in your business. Also, registration fees paid for right to use property within a state or local area are deductible.

Deduct your real estate taxes that you pay on your business property. These are state or local taxes on real estate that are for the general public welfare. The taxes must be based on the assessed value of the real estate. The taxes also must be uniformly charged on all property under the jurisdiction of the taxing authority. Report these on form 8829.

Sales tax: Sales tax you pay on a service or the purchase or use of property is treated as part of the cost of service or property:

If the service is a deductible business expense, deduct the tax as part of service or cost.

If the property is merchandise that you bought for resale, the sales tax is part of the cost of the merchandise.

If the property is depreciable, add the sales tax to the basis.

State and local sales taxes you collect from your customers are not tax deductible.

Fuel taxes: These taxes are not deductible.

As you can see, there are many deductions you can take. There are even more that I will go further into in a future post.

-------

Tim Watson is a tax preparer during the season who also runs an SEO directory and an iPod directory. You may use this article as is provided the resource box stays intact.