Being self-employed offers freedom and flexibility, but it also comes with unique tax responsibilities. Proper tax planning can save you time, reduce stress, and maximize your savings. At Two Palms Accounting and Tax Solutions, we’ve outlined key tax tips to help self-employed individuals navigate tax season with confidence.

1. Pay Quarterly Estimated Taxes

As a self-employed individual, you’re responsible for paying quarterly estimated taxes to cover income and self-employment taxes. These payments are due April 15, June 15, September 15, and January 15. Estimate your annual income and deductions to calculate your tax liability, and make payments to avoid penalties. We can help you set up a schedule to stay compliant.

Pro Tip: Set aside 25-30% of your income in a separate account to cover taxes and avoid surprises at tax time.

2. Track All Business Expenses

Deductible business expenses can significantly reduce your taxable income. Common deductions include office supplies, internet costs, business travel, and marketing expenses. Use accounting software like QuickBooks or a dedicated app to track expenses in real-time, and keep receipts for documentation. Don’t forget smaller expenses like mileage or professional development courses.

3. Claim the Home Office Deduction

If you use part of your home exclusively for business, you may qualify for the home office deduction. You can use the simplified method ($5 per square foot, up to 300 square feet) or the actual expense method, which includes a portion of rent, utilities, and maintenance. Ensure the space meets IRS criteria for regular and exclusive use.

4. Deduct Health Insurance Premiums

Self-employed individuals can deduct 100% of their health insurance premiums for themselves, their spouse, and dependents, as long as the policy is in your name or your business’s name. This deduction can also include dental and long-term care premiums, providing significant savings. Be sure to track these payments throughout the year.

5. Contribute to a Retirement Plan

Contributing to a retirement plan like a SEP-IRA or Solo 401(k) not only secures your financial future but also reduces your taxable income. For 2023, you can contribute up to $66,000 to a SEP-IRA or $22,500 to a Solo 401(k), plus catch-up contributions if you’re over 50. Consult with us to choose the best plan for your needs.

Navigating taxes as a self-employed individual can be complex, but with the right strategies, you can minimize your tax burden and stay organized. Contact Two Palms Accounting and Tax Solutions for personalized guidance to optimize your tax strategy and ensure compliance.