3 Tips the Self-Employed Can Use to Lower Their Taxes

Being self-employed offers significant upsides and downsides. You may be more in control of your own schedule and not have an annoying boss hovering around, but you may also face steeper taxes, such as by having to pay the employer portion of the Social Security tax as well as the worker portion. Fortunately, there are a host of tax tips that can benefit self-employed folks. Here are three valuable ones.

Image source: Getty Images.

Image source: Getty Images.

Don't skip these deductible business expenses

Jason Hall: There are a significant number of expenses that self-employed people can generally claim as deductible expenses. They include:

• Dues to professional associations.
• Subscriptions to periodicals.
• Licensing and regulatory fees.
• Training and continuing-education expenses.

The key here is that for these expenses to be deductible, they generally must be related to your current line of work. For instance, if you work with foreign companies, you may be able to deduct the cost of learning a foreign language related to your work. However, if you're just boning up on Spanish for your next vacation, that wouldn't pass muster.

Many of these expenses can be small on their own. But added together, they can quickly turn into thousands of dollars out of your pocket. If they're related to your work, take advantage of the ability to deduct them and put a little money back in your wallet come tax season.

Image source: Getty Images.

Use a health savings account

Selena Maranjian: Many self-employed people choose health insurance plans with high deductibles, to keep their premium expenses down. Such folks are in luck -- because they can make use of a health savings account (HSA) that will shrink their tax bill.

You fund HSAs with pre-tax dollars to spend that money on qualified health expenses in a tax-free manner. If you earn $60,000 and plop $3,000 into an HSA, your taxable income shrinks to $57,000, letting you avoid paying taxes on that $3,000. If you're in the 25% tax bracket, you can save $750!

There are plenty of rules, though, of course. If your insurance plan has a deductible in 2016 of at least $1,300 for single-person coverage or $2,600 for family coverage, you can qualify to sock away up to $3,350 (for singles) or $6,750 (for families) -- plus an extra $1,000 for those 55 or older. (For 2017, the single contribution limit rises to $3,400, but the other limits remain the same.) The deadline for funding an HSA is the same as that for IRAs for most of us. That's generally April 15, but it's April 17, 2017, for the 2016 tax year, because the 15th occurs on a Saturday.

Here's an especially great feature of HSAs: The money is meant to be spent on qualifying healthcare expenses, but whatever isn't spent remains in the account and can be invested and grow. Whatever hasn't been spent by the time you reach 65 can be withdrawn for non-health-related expenses. In other words, it's kind of like a retirement account, too!

Image source: Getty Images.