![]() Small business owners get a break, too: you can deduct contributions you make to a retirement plan for your employees (sole proprietors would deduct those on Schedule C or Schedule F while partnerships and corporations would deduct them on their entity's tax form). 10 or Keogh plan during the year, you can deduct contributions you make to the plan for yourself on the front page of your tax return on line 28 (highlighted below). If you contributed to a self-employment SEP (simplified employee pension) plan, SIMPLE (savings incentive match plan for employees) plan, or qualified plan like an H.R. (For more on how Social Security wage tax numbers bumped up, resulting in a higher tax bill this year, see this prior post.)Ģ. You can't deduct the other portion of Social Security and Medicare taxes but hey, neither can wage earners. Fortunately, you can deduct the portion of your self-employment tax equivalent to what an employer would pay (meaning Social Security (6.2%) and Medicare tax (1.45%)) on the front page of your tax return on line 27 (highlighted below) as an "above-the-line" deduction, or adjustment to income. If you’re self-employed, you pay both portions. A key difference between the two is that if you are employed by a business, you pay Social Security (6.2%) and Medicare tax (1.45%) as the employee, and your employer kicks in tax at the same rates (6.2% and 1.45%, respectfully) on your total wages. Not everyone is aware, however, that there are corresponding taxes on self-employment income, sometimes called SECA (Self-Employment Contributions Act). You already know that wages are subject to Social Security and Medicare taxes, together called FICA (Federal Insurance Contributions Act) taxes or payroll taxes since they are taken right out of your paycheck. To help you out, here are 10 can't miss tax breaks for small businesses and self-employed persons:ġ. ![]() It's no wonder that a number of the questions in our last #AskForbes Twitter chat focused on deductions for small business. ![]() That's 1 in 3 individual taxpayers who filed an individual tax return reporting business-related income. Of the nearly 148 individual income tax returns filed in 2014 (the last year for which complete data is available, downloads as a pdf), 46 million - or 1/3 - of tax returns reported income from a sole proprietorship, pass-through business entity (like an s corporation, partnership or LLC), rents/royalties, or farms. Data from the Internal Revenue Service (IRS) supports the notion that small businesses are making a significant economic impact.
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