The 17 biggest tax breaks for the self-employed in 2022

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Why not take advantage of all the tax advantages available to you?


Key points

  • Tax breaks help defer some of the cost of doing business.
  • Keeping careful records can help you remember what expenses to deduct.

Ah, it’s that time of year again. A time when people start gathering documents, filling out forms, and hoping against hope not to be wrong. Tax time for the average American is no picnic, but if you’re self-employed, you have even more to deal with. Luckily, you also get some tax breaks. Here are the 17 biggest breaks for self-employed taxpayers in 2022.

Read more: Best tax software for 2022

1. Startup cost

A lot goes into starting some small businesses. There’s market research, technology, materials, occasional legal fees, and more. If you start a business this year, you can deduct up to $5,000 in expenses.

2. Advertising costs

You want people to know about your business, so the cost of promoting your business can be deducted. This includes all kinds of advertisements, from online banner ads to business cards.

3. Qualifying business income

The qualified business income deduction (QBI) allows owners of sole proprietorships, partnerships and S corporations to deduct up to 20% of their income. Only businesses with taxable income of $164,900 or less are eligible for this deduction. If you are married, couples filing jointly can have a combined income of $329,800.

4. Home office expenses

Suppose you have a home office used exclusively for business purposes. In this case, you can deduct a portion of your overall housing expenses, such as utilities, mortgage interest, property taxes, and insurance premiums. If the income earned by your business exceeds your total expenses, you can deduct them all. There is also a simplified method, which allows you to deduct $5 per square foot of office space up to 300 square feet.

5. Retirement savings

For self-employed people with a SEP IRA or Solo 401(k), the deduction makes it easier to set aside money for retirement.

6. Insurance premiums

Not only can small business owners deduct health, dental, and vision insurance, but you can also deduct premiums paid for liability and malpractice. And an often overlooked deduction? Long term care insurance premiums.

7. Self-Employment Tax

There’s no getting around the need to pay self-employment tax when you own a business, but to offset the cost, the IRS allows you to deduct half of the amount you pay.

8. Vehicle costs

You can deduct the dollar value of miles flown if you are traveling for business.

9. Depreciation of property, plant and equipment

Naturally, the things you use to do business will wear out and depreciate. When items you expect to last more than a year start to age, you can deduct them over time.

10. Office supplies

All those fun things that litter your desk and fill your drawers are deductible, as long as they’re used for the business.

11. Telephone and Internet

It would be difficult to do business without a phone or internet connection, which is the main reason why part of both bills is deductible (the part used for business).

12. Business meals

If you organize business meals, 100% of the expenses paid or incurred in 2021 and 2022 are deductible.

13. Business trips

As long as a trip is a clearly defined business trip, expenses such as flights, taxis and hotel rooms are fully deductible.

14. Interest on Loans and Credit Cards

If you pay interest on any purchases made specifically for the business using a loan or credit card, it is deductible.

15. Memberships and Subscriptions

Let’s say you are a builder and you subscribe to several publications written for builders, or you are a member of a builders association; both are deductible.

16. Continuing education

If you’re in a field that requires continuing education (like you’re a custodial provider or an accountant), you can deduct the cost of those courses.

This is a credit rather than a deduction, but it’s important for you to know. If you had to take a leave of absence in 2021 because you were sick with COVID-19 or a family member was sick, you may be able to claim a credit by filing Form 7202. The IRS provided this breakdown of that is allowable.

Owning a business is both exciting and nerve-wracking. It’s good to know that Uncle Sam allows you relief at tax time. Your job is to keep careful records so you never forget to deduct an expense.

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