Five Tax Benefits for Sole Proprietors

Sole proprietors are in a good position when it comes to tax because they have a range of benefits exclusive to them. If you are a sole proprietor and you aren’t yet claiming these five tax benefits, you are missing out on a lot of money.HomeOfficePic

  1.      Health Insurance Deductions

The big benefit you have is you can deduct contributions to your health insurance package for you, your spouse, and any dependents. No other type of business enables you to do this. This deduction can make a substantial impact on your finances.

  1.      Business Expenses

Any business expenses, such as the cost of gas and business lunches, can be deducted from your tax return. Make sure you keep any receipts and other documentation in case you are selected for an audit at a later date, though.

  1.      Home Office Deduction

It’s still possible to claim a home office deduction from working out of your home. Many sole proprietors can use the tax deduction to cover their household bills.

Do beware of how much you claim on this deduction. The IRS is really clamping down hard on frivolous deductions on home offices.

  1.      Self-Employment Taxes

Sole proprietors have to pay these taxes for themselves. You are not having money withheld from your paycheck so you have to pay via estimated taxes throughout the year so Uncle Sam can take his cut.

  1.      Personal and Business

To the annoyance of the IRS, the biggest tax benefit is that you can blur the lines between personal and business expenses. Just make sure you keep accurate documentation, as sole proprietors are prone to heavy IRS scrutiny.

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