CPA and TurboTax professional Lisa Greene-Lewis explains the fundamentals of the home-office deduction, in addition to deductions for automobile bills or mileage, and methods self-employed staff can save for retirement.
Read the transcript under or watch the video above.
Tracy Byrnes: With the gig economic system all over the place today, there is a ton of individuals self-employed. So it is actually necessary to know what ought to go in your tax return, and what should not, fairly frankly. Lisa Greene-Lewis, TurboTax professional and CPA, is right here with us proper now. So I believe the very first thing individuals have to understand once they grow to be self-employed, is that Schedule C turns into their new greatest buddy, is not it?
Lisa Greene-Lewis: Yes, it’s your greatest buddy, and you’ll take a number of deductions on there.
Tracy Byrnes: Right. And so a number of the issues to begin to consider are the retirement contributions. Just since you’re self-employed doesn’t suggest you should not save for retirement. You have a self-employed IRA, or a SEP IRA, you may nonetheless make some contributions to that, cannot you?
Lisa Greene-Lewis: Yeah, so for tax 12 months 2022, you may nonetheless contribute to your SEP IRA, or make a 2022 contribution as much as $61,000, or 25% of your revenue, whichever is much less, and make an influence on that tax return. And for tax 12 months 2023, it is as much as $66,000, or 25% of your revenue.
Tracy Byrnes: And you have got till the date of the extension, proper? If you select to increase your tax return, you continue to could make that contribution, appropriate?
Lisa Greene-Lewis: Yes, that’s the distinction between a SEP IRA and a daily IRA. So self-employed, they’ve that benefit of with the ability to contribute that, up till the extension deadline, and likewise much more cash that they’ll contribute and make an influence on their taxes.
Tracy Byrnes: Yeah, 100%. So individuals ought to concentrate on that. The different factor that self-employed individuals have is a house workplace. The drawback, after all, with the house workplace is that the principles are just a little murky. My desk is sitting in the course of my lounge, that does not rely as a house workplace.
Lisa Greene-Lewis: Right, it needs to be a devoted house for your corporation. It cannot be your kitchen desk, the place everyone eats. it needs to be a devoted house, however it may be a pleasant deduction, in case you have a devoted house. It’s primarily based on the proportion of use in your house, and also you’re in a position to take that proportion occasions your property bills, like your mortgage curiosity, or your hire, property taxes, utilities. So you positively need to hold that in thoughts.
Tracy Byrnes: I believe the house workplace is an incredible deduction. But individuals additionally needs to be conscious that, in case you do work for a enterprise, and so they provide an workplace for you in a constructing someplace, you aren’t getting the house workplace deduction. So simply concentrate on that. The different factor individuals neglect about too, is fuel mileage. If it’s a must to drive someplace as a self-employed individual, you may deduct some cash.
Lisa Greene-Lewis: Yes, fuel mileage, that could be a large one. And for tax 12 months 2023, is 65.5 cents per mile. Or you may select to make use of the precise value methodology. And so with that methodology it is primarily based on your corporation use. And the proportion of enterprise use is multiplied by your precise bills, like your lease funds, your repairs for tires, or something like that.
Tracy Byrnes: So it is value working it each methods. You introduced up an important level about shopping for tools. If I’m fascinated by doing that, I most likely ought to get on it, proper?
Lisa Greene-Lewis: Yes, so in case you want any tools for your corporation, you would possibly need to think about shopping for that by the top of the 12 months, as a result of something immediately associated to your corporation. So pc tools, video tools, something like that, you’d be capable of deduct if it is immediately associated.
Tracy Byrnes: It looks as if there’s a number of totally different guidelines for self-employed individuals, Lisa. What’s one of the best ways for them to deal with this?
Lisa Greene-Lewis: So at tax time, you need to use our TurboTax Premium. And so with that we seek for industry-specific deductions, ones that you simply assume it’s possible you’ll not have even imagined that you’d get, so that you simply get all of the deductions that you simply’re eligible for. And then you can too totally hand your taxes over to our TurboTax stay full service tax consultants, and so they can do your taxes for you in a single assembly.
Tracy Byrnes: Yeah, self-employed individuals have an entire new algorithm, in order that they want all the assistance they’ll get. Lisa Greene-Lewis TurboTax professional and CPA. Thank you for sharing.
Lisa Greene-Lewis: Thank you for having me.
Editor’s Note: The content material was reviewed for tax accuracy by a TurboTax CPA professional for the 2022 tax 12 months.