Don't Forget the Self Employment Tax Deduction
Pay Less and Keep More of the Work at Home Income
Aug 31, 2009
The self employment tax is an annual fee paid by every independent contractor, work at home professional and freelance worker who earns enough income to be required to report to the government. Income taxes are paid by every single employee, including the self employed. This can add up to a lot of expense at the end of the year for any self employed professional. Learn how the self employment tax deduction can help save on some of that burden, and learn how to keep more of that work at home income.
The Self Employment Tax
All of the income earned by self employed professionals is subject to the self employment tax, which is 15.3% of said income. This burden comes on top of ordinary income taxes which are paid by everyone who works for a living. When paid annually, paying all of these taxes can take a large chunk of income and create quite a strain on independent budgets. Any deduction that might reduce payments is to be greatly desired.
Lessening the Tax Burden
One way to soften some of this payment is by claiming expenses through the year. Any money spent on travel, equipment, supplies or other purchase made in the name of work can be claimed by professionals. This will reduce the amount of the tax payments which need to be made. However, claiming these expenses doesn’t encompass the self employment tax deduction itself. In fact, many self employed professionals don’t even know the deduction exists.
The Self Employment Tax Deduction
The self employment tax deduction is so obvious, it’s often completely overlooked by self employed and tax professionals alike. However, all independently employed professionals are perfectly within their rights to claim all working expenses they incur throughout any fiscal year. As such, this includes even the self employment tax which must be paid under the law of the land.
This deduction does not effect self employment net earnings, nor does it actually change the amount that will be paid in self employment taxes. It does, however, change the amount paid in income taxes for the year. Through the self employment tax deduction, half of the self employment tax itself can be deducted, creating a bit of a tax break for independently employed professionals. This extremely simple deduction is easy to forget, but it can help alleviate some of the burden paid by independent contractors…so use it!
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