What Can You Write Off on Taxes If You're Self Employed?

Tax write-offs reduce the amount of a U.S. taxpayer's income the Internal Revenue Service (IRS) can tax. The IRS allows self-employed taxpayers to take a number of deductions for expenses related to carrying out a business. Self-employed individual can deduct 100 percent of most business expenses, while the IRS place limits on write-offs for others.

Self-employment Tax

For the 2010 tax year, the self-employed have to remit 15.3 percent of their gross income to pay for Social Security and Medicare. According to the Social Security Administration, the total contribution for Social Security and Medicare comes to 13.3 percent for the 2011 tax year. These social programs provide health care to the elderly and disabled and a monthly check to the contributor upon retirement. Employees must pay these self-employment taxes on $106,800 or less in annual income and Medicare tax of 2.9 percent on earnings greater than $106,800. The IRS allows the self-employed to deduct half of self-employment tax on Form 1040 Line 27.

Travel

The self-employed can deduct 100 percent of airfare costs as long as the main purpose of the trip is business. In addition, taxpayers can deduct up to 50 percent of meals, lodging and vehicle rental costs while on a business trip. If a self-employed individual drives to see clients or conduct business, he can deduct 50 cents per mile driven. Driving to and from work on a regular basis does not count as a tax write-off.

Medical

The self-employed can write-off 100 percent of all money placed into a Health Savings Account (HSA) and health insurance premiums. If a taxpayer pays for medical or dental expenses out of pocket, he can write-off these expenses on his taxes up to a maximum limit of 7.5 percent of his adjusted gross income.

Retirement

The self-employed can choose to enroll in a traditional Individual Retirement Account (IRA) that allows for a maximum contribution of $5,000 a year and $6,000 a year if aged 50 or older. Individuals can deduct all contributions to an IRA up to the 2010 limit on their Form 1040 tax return.

Expenses

The self-employed can take a deduction for rent or mortgage payments for any part of their home used for business on IRS Form 8829. In addition, business owners can take deductions for cell phones, Internet connections, electronics, depreciation of capital equipment, office expenses, repairs and maintenance, business insurance, legal services and advertising. If a taxpayer uses any of these expenses for both personal and business use, she can only deduct the portion of the expense used for business purposes.

References

• IRS.gov: IRS Announces 2010 Standard Mileage Rates; December 2009
• Turbo Tax: Tax Topics for Freelancers, Contractors and Consultants; 2009
• IRS.gov: Form 1040 Schedule SE; 2010
• IRS.gov: Form 1040 Schedule C; 2010
• IRS.gov: 2010 IRA Contribution and Deduction Limits; November 2010
• Social Security Administration: Electronic Fact Sheet; January 2011