Self-employment represents a significant share of the U.S. labor market. Many choose to work full-time as a sole-proprietor while many others pursue it part time through side hustles as a supplement their Form W-2 income. No matter your time commitment, it behooves you to learn about the self-employment tax deductions useful for managing your tax bill.
Take advantage of last-minute self-employment tax deductions before year end and defer income until next year.
1. Defer Income and Accelerate Self-Employment Tax Deductions to Avoid Higher Tax Bracket
As a Form W-2 employee, your employer pays their equal portion of payroll taxes on wages or salaries paid to you. However, when you are self-employed and you are the employer, it is your responsibility to pay both portions.
2. Use the Self-Employment Tax Deduction
Tax-advantaged retirement accounts can lower your taxable income and grow funds in a tax-efficient manner.
3. Contribute to an Individual Retirement Plan (IRA)
If you use a qualifying high deductible health plan to cover yourself or your family, you will have access to this triple tax-advantaged account.
4. Contribute to a Health Savings Account (HSA)