While self-employed workers and small business owners have a lot more tax responsibilities to contend with, the good news is that they are entitled to a host of tax deductions. Here is a small sampling of tax deductions that small business owners should know about and claim.
Self Employment Tax Deduction
Those who are self-employed are required to pay taxes on this status. The official name for the tax law that prescribes this is called the Self-Employment Contributions Act, Or SECA. In addition to paying taxes according to SECA, self-employed workers are required to pay their own Social Security and Medicare contributions. These are prescribed under the Federal Insurance Contributions Act, or FICA.
While the self-employed are responsible for paying for taxes under both acts, the good news is that the self-employed can claim a tax deduction for SECA taxes. This helps to relieve the amount of money that a self-employed worker is required to pay.
Health Insurance Deduction
Many self-employed workers aren’t aware that they can claim their health insurance expenses as a tax deduction. This is because most workers are used to their employers handling the cost of purchasing a policy, but as the self-employed learn, they are the employers who are responsible for this task.
Not only can the self-employed claim the expenses associated with purchasing their own health policy, but in many cases, they can also claim the associated costs of purchasing policies and paying the premiums for their spouses and dependents.
Marketing and Advertising Deductions
The cost of marketing and advertising one’s business venture is all tax-deductible. Not only does this include the associated costs involved with using traditional media channels (television, print, radio placements), but this also applies to digital marketing and ad campaigns. These include ad purchases on search engines, blogs that utilize organic search or SEO, social media platform post “boosts,” websites, hosting, domain name purchases, and of course, the cost of internet service.
A self-employed worker can also claim marketing and advertising deductions for offline costs such as tickets to seminars and events where they’ll market their business. There are also supply costs such as flyers, brochures, direct mail, and graphic designers.
Service Provider Deductions
Finally, self-employed workers can claim as tax deductions the cost of hiring service providers who allow the business owner to conduct business. These include attorneys, CPAs, bookkeepers, and business consultants, to name a few.