by Harvey Amwake

Whether you’re contemplating the leap into self-employment or have already jumped, be aware of the available tax breaks.
Accelerated expensing. Planning to purchase new or used equipment or software for your business? You may be able to deduct up to $250,000 of the cost on your 2008 federal income tax return. The immediate expensing trims both taxable income and the amount subject to social security tax. The write-off also reduces your adjusted gross income, which would increase deductions that are calculated using this figure.
 

Bonus depreciation. The new bonus depreciation rules let you deduct as much as 50 percent of the cost of qualified new equipment purchased in 2008. Generally, you’ll choose between this option and accelerated expensing, though in some cases it’s possible to combine the two.

Medical costs. You can write off up to 100 percent of premiums for health, dental, qualified long-term care, and supplemental insurance. Some limits apply, but the insurance can cover you, your spouse, and your dependents.

Family employees. Hiring family members to perform useful services for a reasonable wage can generate a business expense and reduce your self-employment tax.

Retirement savings. Retirement plan options for self-employed individuals include a SIMPLE, a SEP, a Keogh, or a 401(k). Contributions can bring down today’s tax burden and provide tax-deferred savings for tomorrow. Another plus: You may qualify for a credit of up to 50 percent of the plan’s set-up costs (with a $500 annual limit).

Other breaks. Other available tax breaks include a possible deduction for business travel costs, home office expenses, and 50 percent of the self-employment taxes you pay. To learn more about taxes and self-employment, give us a call.

This article is for general information only and does not constitute financial advice.  If you have any questions about financial matters, consult a professional tax adviser.  Harvey Amwake, CPA, is a tax and small business consultant with the accounting firm of Arthur Spoon & Company, Ltd., at 1130 E. Missouri Ave., Suite 820. He can be reached at 602-264-6500 or by e-mail at Harvey@ArthurSpoon.com