There are many valuable tax deductions for freelancers, contractors and other self-employed people. Here are five of the big ones that you should explore as tax season nears:
Part of your house
Calculate the percentage of your home's square footage that you use in your business, in the IRS' words, "exclusively and regularly" for business-related activities. That percentage of your mortgage or rent, for example, becomes deductible
Your health insurance (maybe)
If you bought policies on your own for yourself or your family, you might qualify for a tax break on the premiums. It is an adjustment to income rather than an itemized deduction, which means you don't necessarily have to itemize to claim it. If you are eligible to enroll in your spouse's employer's plan — even if you choose not to, maybe because it is more expensive than your own — you can't take the deduction.
Your work-related education
You have to stay smart to run a growing business, and there are tax breaks for that. The costs of "qualifying work-related education," including tuition, books, supplies, lab fees, transportation to and from classes and related expenses, are deductible if the education "maintains or improves skills needed in your present work."
Your vehicle
Your can deduct a little more than $1 for every 2 miles you put on your vehicle for business purposes. At the end of the year, tally the number of miles you drove in the vehicle for business, multiply that by the IRS' preset standard mileage rate — 54 cents per mile in 2016 — and deduct the total. Be sure to keep a mileage log; you will need it if you're audited.
Your retirement savings
Contributions to a solo or one-participant 401(k) plan of up to $53,000 per year or 100 percent of earned income, whichever is less, are deductible. You can contribute, as both an employee and the employer, up to $18,000 in 2016, plus a $6,000 catch-up contribution if you are 50 or older. And you can add approximately 25 percent of net self-employment income, up to $53,000.
