It's available for owners of S corporations, partnerships, LLCs and other "pass-through entities"…but did you know that self-employed people operating as sole proprietors can also claim it? It's a tricky tax break with several special rules and restrictions, but the write-off is sizable if you can jump through all the hoops. There's a relatively new tax deduction that you may have heard about – it's called the qualified business income deduction (a.k.a., the Section 199A deduction). You get this tax-saver every year you have a qualifying home office. If you have a 300-square-foot home office (the maximum size allowed for this method), your deduction is $1,500. However, the IRS has come up with a simplified method that allows taxpayers to deduct $5 for every square foot that qualifies for the deduction. Many work-at-home taxpayers skip this break, either because they don't know about it, are afraid claiming it will trigger an audit, or are put off by the recordkeeping hassle necessary to back up the deduction if challenged. You can also write off part of your rent or, if you own your home, depreciation (a noncash expense that can save you real money on your tax bill). Pass that test and part of your utility bills and insurance costs can be deducted against your business income. The key to the home-office deduction is to use part of your home or apartment regularly and exclusively for your moneymaking endeavor. Whether you're fully self-employed or do some freelancing in addition to your "regular" job, if you work at home the government might subsidize what are generally considered personal expenses. For example, if your total annual car costs are $5,000 and 20% of your miles were for business, then your deduction is $1,000 ($5,000 x.
– and multiply the total by the percentage of total miles driven that year for business reasons. With the actual expense method, you add up all your car-related expenses for the year – gas, oil, tires, repairs, parking, tolls, insurance, registration, lease payments, depreciation, etc. Make sure you keep good records of the dates and miles you drive for work…and don't include driving for any personal trips or errands. If you use the standard mileage rate, you can deduct 58.5¢ for every mile driven for business during the first six months of 2022 and 62.5¢ per mile for the second half of the year (the IRS adjusted the standard mileage rate mid-year because of high gas prices). There are two ways to calculate the deduction – you can use the standard mileage rate or your actual car expenses. Any self-employed person who makes deliveries, drives to a client's location or otherwise uses a personal vehicle for work-related purposes can claim this deduction. There's a tax deduction waiting if you drive your own car for business…and it isn't just for Uber or Lyft drivers.
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