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15 Tax Breaks for Self-Employed Clients

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With the recent uptick in self-employed workers, chances are that some of your clients might be looking to freelance or register their own businesses. In either case, you can advise them on how to lower their self-employment taxes by considering the tax breaks below, including the new business income deduction. Your self-employed clients will thank you!

Oct 8th 2021
Attorney Cloud Peak Law
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Self-employed workers have become a prominent demographic amidst the COVID-19 pandemic. Labour Market Information Council reports that in Canada, as much as 73 percent of self-employed people are working for their solely-owned businesses. While the numbers are less clear in the U.S., where nearly anyone can set up an LLC, the chances are that many workers are looking into self-employment, either as freelancers or as registered businesses. In any case, though, these individuals still have to pay taxes. However, thanks to the many tax breaks available to small businesses, self-employed folks may be able to keep a significant portion of their income. Accounting professionals should advise their self-employed clients about the following tax breaks.

1.     Health Insurance

This deduction is conditional, based on whether a self-employed individual is qualified to join their spouse's medical plan. If they don’t qualify, they can deduct medical and dental premiums for spouses, dependents and children below the age of 27. This deduction is an income adjustment, not an itemized deduction, so it's not necessary to itemize it to claim it.

2.     Transportation

A self-employed person may deduct mileage costs for business-related travel using their own car. However, they will need a mileage log to prove their travel. Alternatively, they can opt to deduct car-related expenses such as gas, oil, depreciation, licenses and so on. If they have five or more cars registered to their business, they will have to choose the latter.

3.     Education

If your self-employed client pays to earn skills that they can use at work, the cost of that education is deductible. This deduction covers tuition, lab fees, supplies, books and transportation to campus.

4.     Home Offices

Most self-employed individuals have a dedicated workspace at home. If so, your client can claim for the percentage of their floorplan the home office takes up. The deduction may apply to a portion of the mortgage paid on the entire house. Alternatively, your client can opt for a simplified deduction, which allows them to deduct five dollars per square foot, up to $300. That amount would cover a 17x17 workspace, which is larger than many home offices.

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By jelliott
Oct 11th 2021 10:02 EDT

Believe your calculation on No. 4 regarding size of home office is incorrect. A $300 max simplified deduction would only account for 60 sq. ft. A 17x17 office is 289 sq. ft.

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By SkinnVinny
Oct 20th 2021 15:26 EDT

Yes, it is $5/sq ft up to a max of 300 sq ft or $1,500 total.

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