Learn about some of the business deductions available to the self-employed, and actions to take before Dec. 31 to minimize your taxes for when April rolls around. Watch the video or read the transcript below.
Video transcript:
Tracy Byrnes: A lot of entrepreneurs out there these days and a lot of people working from home making money. So what do they need to know come tax time? And more importantly, what do they need to know before the end of the year to minimize their tax bill?
Lisa Greene-Lewis, TurboTax expert and CPA is here with us right now. Lisa, these guys have a whole ball, a whole new ball of wax to deal with. In particular, they have to introduce themselves to Schedule C. So their income and expenses all go on Schedule C— what do people need to know about their expenses, more importantly?
Lisa Greene-Lewis: Yeah. So before the end of the year, first of all, make sure you're gathering your receipts for your expenses because you want to maximize your deductions when you file. But also if there's anything that you have been looking at to buy for your business, you want to do that by December 31. And by doing that, you'll be able to deduct those expenses.
So for instance, if there's some equipment you want to buy for your business that will really help you, you can purchase that by December 31. And every year, they raise — it's called the Section 179 Deduction that you can get. And it's up to $1,000,160 for businesses that you can deduct.
Tracy Byrnes: That's an expense number. That's a big number. So start tallying your expenses. Health care is always a line item on the Schedule C, what do people need to know?
Lisa Greene-Lewis: Yeah. So unlike individuals who have an employer. They can — if you're self-employed, you get a deduction for your insurance on your Schedule C. So that's one thing to keep in mind. Keep track of your insurance premiums. When you work for an employer, you can't deduct that unless you can itemize your deductions. So that is a difference.
Tracy Byrnes: Well, health care is really expensive these days. So don't forget that line item. So Lisa, what do people need to know about their SEP-IRA?
Lisa Greene-Lewis: With your SEP-IRA, if you're self-employed, you can contribute up to 25% of your net income, or $66,000. Whichever one is less.
Tracy Byrnes: And finally, self-employed people need to make estimated payments. And there's one coming up, isn't there?
Lisa Greene-Lewis: Yes. So self-employed need to remember, by the end of the year, there will be the fourth estimated payment due in January. So you want to gather all your receipts for your expenses, so you can lower your income and lower that estimated tax payment.
Tracy Byrnes: Yeah. So get those done. And finally, TurboTax can help with all this, can it?
Lisa Greene-Lewis: Yes. TurboTax can help. We have our industry-specific feature that identifies deductions directly related to your industry. There are so many different industries out there. And it gets smarter. It uses machine learning and AI.
So as more industries are entered, it gets smarter and uncovers deductions that you never imagined that you could get. And with TurboTax, you can also fully hand your taxes off to our TurboTax Live Full Service tax experts. And they can do your taxes in one meeting.
Tracy Byrnes: It's good stuff. Lisa Greene-Lewis, TurboTax expert. Thank you for being with us.
Lisa Greene-Lewis: Thank you for having me.
Editor's Note: The content was reviewed for tax accuracy by a TurboTax CPA expert for the 2022 tax year.
