Here's how self-employed folks can cash in on three valuable federal income tax breaks.
Are you self-employed? Pull up a seat while I share three encouraging pieces of information about our beloved tax code.
If you buy a new or pre-owned heavy SUV, pickup, or van this year and put it to use in your business, you’re potentially eligible for 100% first-year bonus depreciation for the business-use percentage of the cost.Still more good news: You may also be able to claim the qualified business income deduction.Note: By self-employed, I mean a sole proprietor, partner, or LLC member who is treated as a sole proprietor or partner for federal tax purposes. Onward.
If business usage is between 51% and 99%, you can deduct that percentage of the business-use portion of the cost in 2022. The write-off will reduce your federal income tax bill and self-employment tax bill, if applicable. You might also get a state tax income deduction. Nice. First-year depreciation deductions for lighter passenger vehicles cannot exceed $19,200 for vehicles placed in service in 2022 and used over 50% for business.
Finally, you can also treat all mileage between any other regular place of business and temporary work locations as business mileage. These trips can add up to lots of business miles and make it much easier to pass the over-50%-business-use test. Second Way: Conduct your administrative and management tasks in the home office. However to take advantage of this qualification rule, you cannot make substantial use of any other fixed location for administrative and management chores.
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