If you’re looking for tax deductions for self-employed in Kennett Square, Pennsylvania, navigating the complexities of tax season can be challenging. However, understanding the various tax deductions available to you can significantly reduce your taxable income and help you keep more of your hard-earned money. Cyron & Company in Kennett Square can help you with some valuable tax deduction options and provide tips to prepare for the upcoming tax season.
GET THE MOST TAX DEDUCTIONS THIS SEASON
Self-Employed and Satisfied
“I have been a client with Cyron & Company for over 15 years for tax preparation. They have been great to work with and are always very helpful with any questions and/or concerns I have had. I would definitely recommend their services.” Debbie Waltman
Self-Employment Tax Deduction
This one may seem obvious, but it’s one that people often forget, self-employed individuals can deduct the employer portion of their self-employment tax, which is 50% of the total self-employment tax paid. This deduction can help reduce your taxable income.
Home Office & Business Deductions
One of the most common and valuable tax deductions for self-employed individuals is the home office deduction. If you use a part of your home exclusively for business purposes, you may be able to deduct a portion of your home’s expenses, including mortgage interest, property taxes, utilities, insurance, and even home repairs. It’s essential to maintain accurate records of your home office expenses and ensure the space is used exclusively for business.
Tax deductions for self-employed in Kennett Square also include the costs directly associated with running your business. Some common deductible business expenses include office supplies, software programs, apps, or subscriptions that are essential to your business operations. Keeping detailed records of these expenses will help you maximize your deductions.
Health Insurance Deduction
Self-employed individuals can benefit from the health insurance deduction. This allows you to deduct premiums for health, dental, and long-term care insurance from your taxable income. To qualify, you must not be eligible for a health plan through an employer, including your spouse’s plan.
By taking health insurance premium tax deductions for self-employed in Kennett Square, you lower your taxable income, which reduces the amount of taxes you owe. This is an above-the-line deduction, which means you don’t have to itemize deductions to claim it. The tax benefit is directly applied to your Adjusted Gross Income (AGI), which is the starting point for calculating your tax bill.
CONTACT THE KENNET SQUARE TAX PROFESSIONALS
Business Meals Deduction
You can deduct 50% of the cost of meals associated with conducting business, such as meals with clients, potential clients, or employees. This deduction can help reduce your taxable income while fostering business relationships.
Business-Related Travel Expenses
If you travel for business purposes, many of those travel expenses can be deducted, including transportation, lodging, meals, and incidental costs like phone calls or parking fees. Keep in mind that you need to differentiate between personal and business travel1. If you mix business and personal travel, you can only deduct the portion that is directly related to your work.
Vehicle Tax Deduction
For vehicle tax deductions for self-employed in Kennet Square, you must use the vehicle regularly and primarily for business purposes to qualify for the deduction. If you only use the vehicle occasionally for business or your business use is minimal, you might not benefit from this deduction. Additionally, if your vehicle is used by more than one person in the business, you can still claim the deduction, but the use must be tracked accordingly.
1. Standard Mileage Rate Method
Under this method, you simply multiply the number of business miles driven during the year by the IRS standard mileage rate. This method is often simpler because it doesn’t require you to keep track of all the specific expenses associated with your vehicle. Instead, the IRS provides an annual mileage rate that includes factors like gas, oil, insurance, repairs, and depreciation.
It’s easy to calculate since you only need to track your business miles, not individual expenses like gas or maintenance. In some cases, the actual expenses of your vehicle could be higher than the standard mileage rate would cover, resulting in a lower deduction if you use this method.
2. Actual Expense Method
The Actual Expense Method requires more detailed record-keeping but can potentially yield a larger deduction. Under this method, you deduct the actual costs of operating the vehicle for business use, including:
- Fuel: Gas and other fluids used to operate the vehicle.
- Maintenance and Repairs: Oil changes, tire replacement, and other maintenance work required for the vehicle to function.
- Depreciation: You can deduct a portion of the vehicle’s purchase price, which is spread out over several years, based on IRS depreciation schedules.
CONTACT US FOR TAX HELP THIS SEASON
- Insurance: The cost of your vehicle insurance can be deducted in proportion to how much you use the vehicle for business.
- Registration Fees: You can also deduct the portion of your vehicle’s registration fees that apply to business use.
- Interest: If you financed the vehicle, you may deduct the interest on the loan for the portion of time used for business purposes.
If your vehicle expenses are high (e.g., if you have a large, fuel-hungry vehicle or high maintenance costs), this method may result in a larger deduction compared to the standard mileage rate. It allows you to deduct all costs directly associated with the vehicle’s use, which can add up over time. However, you need to keep track of all vehicle-related expenses throughout the year, including receipts and invoices for repairs, fuel, insurance, and other costs. Maintaining a detailed log of business vs. personal mileage is crucial.
Depreciation Deduction (Section 179)
The Section 179 deduction allows small business owners to deduct the cost of qualifying property, such as equipment, machinery, and software, in the year it is placed in service, rather than depreciating it over several years.
Tax Deductions for Self-Employed in Kennett Square with Cyron & Company
Navigating tax deductions for self-employed in Kennett Square can be daunting, but understanding the various tax deductions available to you can make a significant difference. By taking advantage of these deductions and keeping detailed records of your expenses, you can reduce your taxable income and achieve a more favorable tax outcome. As tax season approaches, make sure to prepare by organizing your financial records, estimating your business income, and consulting with our tax professionals at Cyron & Company if needed.
Cyron & Company
Cyron & Company is a CPA firm based in Kennett Square, PA, offering comprehensive accounting and tax services for small to mid-sized businesses and individuals. Our services include outsourced accounting and CFO solutions, tax planning and preparation, financial statement reviews, business startup consulting, and QuickBooks Online training. The firm emphasizes using cutting-edge digital tools to simplify financial management, helping clients make informed decisions. With over 20 years of experience, we provide customized financial guidance to help businesses succeed.
