Self-Employment Tax Deductions Explained

Tax Season 2024 (for filing year 2023 taxes): Tax Benefits for the Self-Employed

Being self-employed comes with its own set of financial responsibilities, but it also offers opportunities for tax deductions and credits that can help reduce the overall tax burden.

Changes in the tax code in 2018 (via the Tax Cuts and Jobs Act or “TCJA”) impacted self-employed tax deductions. Many of these changes are temporary and set to expire in 2025, but others are permanent.

If you’re self-employed, it’s important to review what you are allowed to deduct each year to make your business as profitable as possible. Some of those tax deductions are listed below:

1. Self-Employment Tax Deduction
2. Home Office Deduction
3. Internet and Phone Bills Deduction
4. Health Insurance Premiums Deduction
5. Meals Deduction
6. Travel Deduction
7. Vehicle Use Deduction
8. Interest Deduction
9. Publications and Subscriptions Deduction
10. Education Deduction

The IRS kicked off the 2024 tax season with a pledge to provide better service for taxpayers. For most tax filers, the top questions are whether they’ll see a bigger tax refund — and how long will it take the IRS to send them their money. At Daniel Ahart Tax Service, we are here to help you along the way, from answering your questions about deductions, assisting you with your tax preparation needs, and even helping you apply for a tax refund advance!” says Daniel Ahart, chief tax officer at the tax preparation company Daniel Ahart Tax Service®

Eligible taxpayers can deduct up to 20% of their qualified business income (QBI)

For owners of sole proprietorships, partnerships, S corporations, and certain trusts, estates, and limited liability companies (LLCs), this deduction provides a great benefit.

A pass-through’s QBI is the net amount of qualified items of income, gain, deduction, and loss from a qualified trade or business,” explains Daniel Ahart

Key provisions that are set to expire in 2025 include:

It is important to note that business tax laws are constantly changing, and these provisions may be modified or extended at any point prior to 2025:

• QBI deduction
• SALT deduction cap
• Standard deduction will return to pre-TCJA levels
• Income tax rates will return to pre-TCJA levels

In a nutshell, most small business tax deductions are more complicated than this quick overview describes, but now you have a good introduction to the basics. There are more deductions available than those listed here, but these above are some of the biggest ones. If you qualify for a tax deduction, your tax liability will diminish. So contact Daniel Ahart Tax Service® and more importantly, don’t pay your taxes late.

What Happens If You File Or Pay Your Taxes Late?

Two penalties may apply. One penalty is for filing late and the other is for paying late. They can add up fast. Interest accrues on top of penalties.

• Late-filing penalty. If taxpayers file their 2021 tax return more than 60 days late, the minimum penalty is usually $210. If the tax owed is less than $210, it’s 100 percent of the unpaid tax. Otherwise, the penalty can be as much as 5 percent of the unpaid tax each month up to a maximum of 25 percent. There’s no penalty for filing late, if the taxpayers is due a refund.
• Late-payment penalty. You’ll likely end up owing a late payment penalty of 0.5% per month, or fraction thereof, until the tax is paid. The maximum late payment penalty is 25% of the amount due. You’ll also likely owe interest on whatever amount you didn’t pay by the filing deadline.

Get The Help You Need When You Are Ready To File

Daniel Ahart Tax Service® prepares all tax returns, helps solve tax problems, and prepares back taxes. 22 Area Locations in Georgia.

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