Self-employed tax payers have many options for deductions on federal taxes. The type of business you own will determine the types of deductions you can claim. Tax laws change on a regular basis; consult an accountant or a tax professional before filing your taxes each year. State tax laws are not always the same as federal tax laws. If your state has an income tax, you may have to recalculate your deductions on your state tax return.
Office Supplies and Equipment
Office supplies or equipment bought for the sole use of your business are deductible on your federal taxes. The Internal Revenue Service (IRS) allows you to claim the full cost of office equipment for the year it was bought, or to depreciate its value over a set number of years. Keep your receipts for purchases of equipment and supplies in order to deduct the correct amount on your taxes, and to support your case if the IRS audits your tax return.
You can deduct for mileage if you use your personal vehicle for business purposes. Keep a notebook in your vehicle and record the date, destination, and beginning and ending mileage for business trips. The IRS sets a dollar amount each year for each mile driven; this is listed in the instructions for Schedule C. If you use a vehicle solely for your business, you can deduct expenses for fuel, repairs and maintenance.
Health Insurance Premiums
The self-employed individual who buys his own health insurance can deduct a portion of the premiums each year. The insurance must not be offered through an employer. Not only can you deduct your premiums, you can also deduct the premiums of your dependents. If you also pay a portion of your employees' health insurance premiums, you may be able to deduct a portion of that cost. Your health insurance company will provide the proof the IRS needs in order for you to claim the health insurance deduction.
One-half of the Self-Employment Tax
The self-employment tax is paid by every self employed tax payer. As of 2011, the current rate for self employment tax is 15 percent of the gross profit of your business. Self employed individuals are allowed to claim half of that 15 percent as a tax deduction.
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