The 17 Biggest Tax Breaks for the Self-Employed in 2022

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

Why not take advantage of every tax break available to you?

Ah, it's that time of year again. A time when people begin gathering documents, filling out forms, and hoping against hope they don't mess up. Tax time for the average American is no walk in the park, but if you're self-employed, you have even more to deal with. Fortunately, you also have some sweet 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, the occasional legal fee, and more. If you started a business this year, you'll get to deduct up to $5,000 in fees.

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 advertising, from online banner ads to business cards.

3. Qualified business income

The Qualified Business Income (QBI) deduction allows owners of sole proprietorships, partnerships, and S corporations to deduct up to 20% of their income. Only businesses with a taxable income of $164,900 or less are eligible for this deduction. If you're 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 that case, you can deduct a portion of your overall housing expenses, such as utilities, mortgage interest, real estate taxes, and insurance premiums. If the income earned by your business exceeds your total expenses, you can deduct them all. There’s also a simplified method, which lets you 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 putting money away for retirement easier.

6. Insurance premiums

Not only can small business owners deduct health, dental, and vision insurance, you can also deduct the premiums paid for liability and malpractice. And one 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 the amount you pay.

8. Vehicle expenses

You can deduct the dollar value of miles traveled if you travel for business.

9. Depreciation of property and equipment

Naturally, the things you use to conduct business will wear down and depreciate in value. As items you expect to last more than a year begin to age, you can deduct them over time.

10. Office supplies

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

11. Phone and internet

It would be tough to conduct business without a phone or internet connection, which is the primary reason a portion of both bills are deductible (the part used for business).

12. Business meals

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

13. Business travel

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

14. Loan and credit card interest

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

15. Memberships and subscriptions

Let's say you're a builder and subscribe to several publications written for builders, or you have a membership in a builder's association; both are deductible.

16. Continuing Education

If you're in a field that requires continuing education (like you're a daycare provider or accountant), you can deduct the cost of those classes.

This is a credit rather than a deduction, but it's an important one for you to know about. If you had to take time off in 2021 because you were sick with COVID-19 or someone in your family was ill, you may be able to claim a credit by filling out Form 7202. The IRS has provided this breakdown of who qualifies.

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

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