These tax breaks could help you keep more of your hard-earned profits. Image source:

If you're self-employed, your tax burden can be rather steep. Not only do you have to pay income tax on your business profits, but you also have to pay the self-employment tax to cover both sides (employer and employee) of the Social Security and Medicare taxes. Fortunately, there are many tax breaks specifically designed for the self-employed, and here are five of the best ones, as described by our contributors.

Selena Maranjian: One major tax break for many self-employed folks is the home-office deduction. Note, though, that you do have to qualify for it. For starters, the office in your home must be exclusively used for business. If you have a desk in a corner of the den where your kids watch cartoons after school, that won't work. The space must also be your principal place of business, or where you meet regularly with customers. If you're a salaried employee and you spend 20% of your working hours working from home in a room that's solely your office, that doesn't qualify. But if you have a part-time side business and work for that exclusively from a home office, that could qualify.

So, how does the home office deduction work? Well, you'll first need to figure out how big the room is, because your deductions will either be based on what percentage of your home your office takes up or on the office's square footage. The latter is a simpler method, allowing you a $5 deduction per square foot, up to 300 square feet, for a cap of $1,500. But there's a good chance that you can deduct more using the percentage approach. But as Jason discusses below, you might be able to get a bigger deduction by actually counting up your total costs for various items.

Jason Hall: As Selena described, the home-office deduction is great, and going to the trouble of itemizing your actual expenses can give you further deductions beyond the default option that the IRS provides. In short, your office needs power, Internet access, and probably uses some of the other utilities tied to the home, such as gas, trash and water, just to name a few.

A percentage of these utilities may also qualify as a deduction, similar to the deduction you get for the percentage of your home the home office makes up. And while a few percent of your power bill alone may not add up to much, taken as a whole, this category can be worth thousands in deductions every year.

Matt Frankel: One self-employed business deduction that has saved me a lot of money in the past is travel expenses. The IRS allows unreimbursed travel expenses to be deducted on your Schedule C, and these can include (but are not limited to):

  • Airfare or train tickets
  • Rental cars
  • Taxi fares
  • Meals
  • Lodging
  • Other expenses while traveling, such as dry cleaning and baggage fees

It's worth noting that the primary purpose of your travel has to be business-related. And, any expenses that could be interpreted as "lavish or extravagant" are not deductible.

The best part about the travel deduction for self-employed individuals (in my opinion, at least) is the deduction for using your own car for business purposes, even if you're driving short distances close to home. You have the choice of using the IRS's standard mileage rate, which was $0.56 per mile for the 2014 tax year -- or, you can choose to deduct your actual expenses, including car payments, depreciation, registration, insurance, and maintenance.

So, if you work from a home office, those business-related trips to client meetings, office supply stores, and the post office could add up to a nice tax deduction at the end of the year.

Brian Stoffel: As a self-employed contractor myself, one of the biggest deductions my family has been able to realize come tax time is through our health insurance premiums. The IRS states that if you are self-employed, any medical, dental, or long-term care premiums you pay for yourself, your spouse, or dependents are tax deductible. This includes adult children who are under the age of 27 at the end of the year.

In 2015, our family will have spent a grand total of about $6,000 on medical and dental premiums. All of that money is tax deductible, and it reduces the amount we'll owe come April. In total, this saves us roughly $1,200.

One important caveat to note is that if you are self-employed, but you and/or your family obtains medical/dental coverage through a spouse whose employer offers such coverage, your premiums are not deductible.

Dan Caplinger: The biggest tax break available to self-employed people is the ability to set up your own personal retirement plan. Various types of plans exist, but the one that lets you set aside potentially the most money is the solo 401(k). With self-employed retirement plans, you're treated as both the employee and the employer, so you're allowed to make not only your normal employee contribution, but also an additional amount that employers are allowed to make.

This means you can save a lot more in a self-employed retirement plan than you could as an employee in a normal company 401(k) plan. Rather than being limited to the ordinary ceilings of $18,000 for those under age 50 and $24,000 for those 50 and older for 2015, the current limits on combined employer and employee contributions to a solo 401(k) go as high as $53,000 depending on your income. Moreover, several financial providers are willing to let you set up solo 401(k) plans at minimal cost in order to gain access to your investment assets, and that gives you the ability to set up your own customized menu of investment options for your solo 401(k) that will almost always be far superior to what a typical employer will provide to employee participants.

If your self-employed business is profitable, then it's a no-brainer to use a solo 401(k) or other self-employed retirement plan to boost your savings. The tax benefits simply can't be beat.