If you’re self-employed, you could qualify for a number of
special tax breaks.
If you’re self-employed, you could qualify for a number of special tax breaks:
-Depreciation – You can take a depreciation deduction for the business equipment you buy. There are two breaks in addition to regular depreciation. The 2002 tax law created an extra 30 percent first-year bonus depreciation deduction for most new business assets bought and placed in service after Sept. 10, 2001. Qualifying assets include equipment, furniture, software and some leasehold improvements, but not real estate. The law also increased the first-year depreciation limit on business passenger vehicles from $3,060 to $7,660.
-Section 179 – Then there’s the Section 179 deduction that lets small businesses write off up to $24,000 of equipment purchases, including those “leery” SUVs, made in 2002. This deduction increases this year to $25,000. Unlike the 30 percent bonus depreciation, the Section 179 deduction may be claimed on purchases of used assets.
-Retirement plans – Self-employed taxpayers can set up a retirement plan and deduct the contributions they make. Retirement plan choices include an IRA, Keogh, SEP, SIMPLE, or 401(k) retirement plan. If you have employees, a plan can be a valuable part of your overall compensation package.
-Home office – If you conduct business from your home, you may be entitled to a deduction for home office expenses. You may qualify to write off the business portion of your home utility bills, insurance, maintenance, and other expenses.
-Other breaks – Health insurance premiums paid by self-employed taxpayers are 70 percent deductible on 2002 tax returns; they’ll be 100 percent deductible for 2003. You may be able to plan some vacations to combine business with pleasure, which could allow you to deduct part of your travel costs.
Please call our office if you would like more information on these and other tax-saving strategies.
Bob Bianchi is a CPA and partner with the accounting and business consulting firm of Bianchi, Lorincz & Co. in downtown Hollister and in Morgan Hill.
