Everyone would love to save money on their taxes. While not attainable for everyone, if you work as an independent contractor you happen to be in luck. Here are four methods you can use to potentially save thousands in tax dollars.
Generate a tax plan at the beginning of each year
Beyond being a good business practice, some tax reducing strategies only work when you maintain steadfast records. For example, managing mileage records of a personal vehicle for work-related purposes could be utilized as a tax deduction. A high-deductible health care plan can also be eligible for a tax advantage plan.
Maintain a record of facilities, supplies, and designated services
From a home office to an office building, most everything at your business is tax-deductible in some form. At the office track your mortgage interest payments, utilities, and supplies for later benefit. Even transportation, computer repair, paying an employee, or purchasing special equipment for a client can be deducted.
Time your large purchases
Simply speaking, tax deductions remain less critical in years of lower-income. Thus, timing your purchases to years of more expected income provides better financial benefits. Section 179 of the Internal Revenue Code makes this all possible. It permits independent contractors to expense large purchases, so the cost will be deducted in that year.
Develop a set of deductions for your business
Perhaps most importantly is being able to identify specific deductions relevant to your contract work. On the IRS website, they maintain articles applicable to small businesses. A tax preparation program could also prove useful, even if you already had an accountant file for you. These programs could find you tax-saving opportunities you would otherwise have missed.
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