If you own your own business or plan to do so, you should know as much as you can about the self-employment tax deduction, which can save you a lot of money if you do. Many of these tax-reduction advantages are available only if you are self-employed and not if you are employed by anyone. All you have to do is enter your own personal Social Security number as your company’s tax identification number and then make sure you file under Schedule C or Schedule C-EZ and you’re ready to start taking advantage of the deduction. .

However, there is a difference between Schedule C and Schedule C-EZ and the benefits they can give you in terms of taking advantage of the self-employment tax deduction. The EZ form should only be used by those who have a smaller amount of expenses and end the year with a substantial profit. Some other things in terms of taking advantage of the reduction using the EZ form, is that it must be a business with no employees, one that has no reason to claim a home office deduction and is not going to report any depreciation. If you qualify for these, you should use the EZ form, otherwise you should just use Schedule C to get the most out of the tax break. Basically, with a Schedule C you can report a loss, otherwise you can’t.

Let’s take a look at what you can claim using the self-employment tax deduction. You first claim equipment expenses under what is called Section 179. Under this section you claim any equipment purchased that year. There may be a limit to the amount that tends to change a lot, so refer to Internal Revenue Service Publication No. 946 to help you find the exact limit.

You can also claim travel under the tax deduction. This includes mileage and percentages of any food and entertainment purchased. As long as you keep good records and your receipts, you would do well to claim this. You should also remember to keep this within the limits of business-related expenses.

You can also include health insurance, social security taxes, and self-managed retirement benefits in your self-employment tax deduction. This means that you can include any premiums for yourself or your family members, as well as a certain amount of the payment you make in social security tax on any claim you may make to qualify for the deduction. The only problem is that you social security claim is only on Form 1040 and not Schedule C. As for self-managed retirement benefits, as long as you open a Keogh or a Simplified Employee Pension and subtract any contributions you can make these plans. This can also only be done on Form 1040. But it’s worth the savings you can claim on a deduction.

One last thing you can claim under the self-employment tax deduction is with respect to a home office. Whether you use the office for file storage and bookkeeping or you don’t spend much time there, you can still claim this as part of your self-employment tax deduction.

As you can see, when it comes to claiming and receiving the benefits of being self-employed, it pays off. As long as you keep careful and accurate records, you can take full advantage of the reduction.