The IRS gives detailed rules and instructions for self employed persons’ tax deductions and write offs.

 

To distinguish between the two, let’s try to be clear. Usually a write off is considered to be a one time reduction of taxable income, often from the loss on the sale of an asset or business. But the phrase “write off” is widely used to mean any deduction that a self employed business owner may take from his taxes. Deductions include payroll, cars, travel, office expenses – including home office expenses – depreciation, professional services, interest paid, etc. Even some taxes are included.

 

“Losses” from the sale of an asset, are generally thought of more specifically as “Write offs”. This phrase is popular when referring to bad investments made by a wealthy taxpayer that reduce the amount of taxes he or she owes. There are many legitimate losses, however, that are taken every year. These can be for casualty losses in a place of business, the sale of a boat, car or building – the sale of stock, bonds, etc., – even the sale of a business itself.

 

If you are setting up a new business as a self employed person, it is wise to create a good accounting system and to maintain and frequently refer to a checklist of deductions and write offs for which you may be eligible. You can potentially save thousands of dollars when you file your return later. It may also mean the difference between having a large tax bill and a tax refund when you do file.

 

For the self employed, TurboTax Online offers valuable tips and information for claiming business expenses and valuable tax deductions.

Another great advantage to itemizing your tax return is the deductions you can receive from claiming your vehicle mileage. There are many reasons that your mileage may be tax deductible.

You can choose to take these optional IRS standard mileage rates if you are an employee, self-employed, and all other taxpayers if you have vehicle operating costs that fall into tax deductible categories.