As home-based pros, we often focus our tax deducting attention on the easy business deductions, which is a great starting point. This week, let’s expand our reach a bit further.
HALF OF YOUR SELF-EMPLOYMENT TAX
Before you were self-employed, you paid half your Social Security and Medicare taxes through your payroll taxes, and your employer paid the rest. But you are now your own boss, which means you are now responsible for the full amount. The up-side of this, however, is that you can now deduct half of those paid taxes on your 1040.
Did you know the costs of having your business taxes prepped and filed can be deducted on Schedule C? Yep! So make sure to have your CPA itemize their fees.
OUT-OF-POCKET CHARITABLE CONTRIBUTIONS
For years, I limited my charitable gifts to monetary donations when a fundraiser rolled around, or when I dropped off a few boxes worth of goodies at the nearby Salvation Army. Both were quick and easy.
But what about mission trips you attend? Or charity-related conventions you volunteer for? Or fundraisers and charity board meetings you host at home? Not only can volunteers deduct travel expenses (i.e. airfare, metro tickets, lodging, meals, etc.), they can deduct charity-specific uniforms, long-distance cellphone calls made on behalf of a charity, and all catering expenses when hosting a fundraiser at home.
If you’re starting a home-build with Habitat for Humanity this spring, remember to track and record all of your car expenses (i.e. what you actually spend on gas while volunteering). Or, deduct the standard mileage rate of 14 cents for each mile you drive while volunteering.
It absolutely stinks that airlines charge our bags a boarding fee. Mike was recently hit with this charge following a business trip, so this fee has me pretty fired-up. The bright side is this — baggage fees, online booking fees, and costs to change travel plans are deductible travel expenses, and an awesome self-employment perk when traveling on business.
Baby Glen is scheduled to begin private preschool this summer, which means our family will receive a favorable tax credit when filing our 2016 tax return – up to 35% of the qualifying expenses of $3000 for one child or dependent (and up to $6000 for two children or dependents)!
This credit varies depending on your earned income and is based on the expenses paid toward childcare. Qualifying expenses include more than just preschools and daycares, too. Babysitters also qualify. So does the cook, housekeeper, and maid who also provide care for your child. Summer camps also qualify. Keep in mind that this credit applies for children aged 13 and under.
ENERGY-SAVING HOME IMPROVEMENTS
Mike and I have considered adding solar panels to our new home. Pricey, but Uncle Sam will reward us for it through 2016 – with a possible credit of 30% of the total cost (including labor!). According to Kiplinger.com‘s Kevin McCormally, Uncle Sam “still offers a powerful incentive for those who install qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines.”
Although, energy-saving measures such as installing storm windows and insulation no longer apply.
Remember to keep excellent records of everything. Whether you stay organized through business software or through a customized excel spreadsheet, be diligent. Maybe set aside one day a month to keep records updated.
Wishing you much success in 2016!!