While there has been controversy surrounding recent tax legislation, it created what could be a boon for self-employed Boomers. The self-employed, contract workers, and freelancers stand to gain in a number of ways because of the way business deductions have been modified.
Writing for AARP, retirement expert Kerry Hannon does a good job of outlining the key tax benefits that may be available to you if you are self-employed, do contract work, or freelance. As with any such advice, though, everyone's situation is different and it always makes sense to consult a tax professional.
Hannon highlights a number of key areas and discusses them, including:
- The qualified business income deduction: You could be eligible for a tax deduction of 20 percent as a sole proprietor or even if you are part of a partnership, own an LLC, or participate in an S corporation.
- Higher standard deduction: A higher standard deduction may remove the need to itemize personal deductions.
- Home office deduction: You could be eligible for a home office deduction (this existed before the new tax law went into effect).
- New equipment write-off: You can potentially deduct a larger amount for new equipment.
- Business expenses: Hannon writes that these are basically the same with a few new restrictions.
- Medical expenses: The self-employed can deduct medical expenses, but the percentage allowed has actually gone down for 2018 and will go back up in 2019.
- Education and training: Work-related education is deductible with some restrictions.
- Automobile expenses: Mileage driven for business is deductible at a slightly higher per-mile rate in 2018.
- Retirement savings: If you're 50 or older, and you don't have an employer retirement savings plan, you can put up to $6500 into a traditional IRA.
Hannon wisely recommends scrupulous book-keeping if you are self-employed. Read her informative article here: