Over the last two weeks we’ve covered the first eight of The Deductible Dozen. All of these are great deductions for any small business. This week I’ll wrap it up with the final four of The Deductible Dozen.
8. Insurance premiums. If you are self-employed as I am, you can deduct 100% of your health insurance premiums. That can be a big chunk considering health insurance has been increasing at an alarming rate over the past four years. So health insurance premiums can do double duty as a deduction and a benefit.
If your spouse worked for you last year….legitimately that is, you can deduct those premiums too. The employment must be real and you must offer the same insurance to your other employees.
As a business owner, particularly if you are over 50, you can deduct long-term care and disability insurance too.
9. Retirement plan contributions. I go into the types of retirement plans extensively in my eBook for business owners. All your contributions that you contribute on your own behalf is deductible. That includes SEPs, SIMPLEs, profit-sharing and 401(k) just to name a few. Saving for your own retirement is very important if you are self-employed, nobody else will do it for you.
10. Social Security contributions. If you start your own business, then you have to pay double the Social Security contributions that an ordinary employee would. That’s because you are required to pay half and the employee half. That equals 15.3% of your net profits.
You can deduct half of the contribution on your tax return!
11. Telephone charges. Any call you make from home for business purposes is deductible. Circle those calls on your bill, total them and enter them into your tax software or turn it in to your accountant.
12. Your children. You can deduct the pay for your kids working in your small business. Depending on how much they earn, they could avoid income taxes. If you are a sole proprietor or a partnership, and employ your child that is under 17, you can deduct the salary as a business expense. Sorry corporations, this is not available to you.
So that’s the end of The Deductible Dozen. I hope this jolts your memory as you prepare for tax season. If you would like to learn a few more secrets to maximizing your wealth, write me at firstname.lastname@example.org, or give me a call at (859) 225-2596.