HE SAYS:

If you operate as an independent contractor; if you are the sole proprietor of a business; or, if you otherwise own any small business that is not a partnership, corporation or LLC, you can count yourself among the ranks of the self-employed. As a self-employed individual, there are certain tax rules that you should know.

You may deduct up to 100% of medical insurance costs paid by you, covering yourself, your spouse and your dependents.

If you use your vehicle for business purposes, you may be able to deduct expenses associated with such use.  In order to take advantage of this deduction, you must keep track of the actual expenses or use the standard mileage rate.   You cannot deduct the cost of commuting back and forth to work from your home or parking expenses while at work.

You may be entitled to a tax break if you operate a business from your home.   You may be able to deduct certain depreciation and operating expenses associated with your home under certain conditions.   You must use, at least, part of your home regularly and only for business purposes and it must be your primary place of business.

You may recover your investment in certain business related properties such as equipment, vehicles, or buildings through the use of depreciation.   Usually, the amount of depreciation allowed is determined by a schedule of depreciation; and, upon the sale of the asset, the depreciation that had been taken is recaptured.   Up to $250,000 of certain tangible business property may be deducted in the year it was put into service rather than using the depreciation method.

Wages and salaries paid to others are deductible if paid during the tax year for work directly related to your business and the pay is reasonable, considering the nature of the work.

You may be able to deduct a leased asset such as a car or computer used in your business.

In Part 2 we will look at some of the rules associated with business travel, entertainment and gift expenses.

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