Being self-employed has many benefits – creating your own schedule, doing something you love and being your own boss, to name a few. Now, the new tax law may offer some additional benefits for the self-employed. While the new law retains most of the self-employment deductions, it offers a few new forms of relief.
Here are two to keep in mind for the 2019 tax season:
Qualified-Business Income Deduction
The corporate tax rate was reduced, but this doesn’t help self-employed business owners whose income is taxed at their personal income-tax rate. To help level the playing field, self-employed taxpayers can now take a 20 percent deduction on this income — also referred to as pass-through qualified business income (QBI). The deduction is available to businesses structured as sole proprietor, partnership or S corporations, although limitations can apply and there are ambiguities in the code. Be sure to consult with a tax professional.
Capital expenses that have a lifespan of more than one year – including equipment used for both home and business – may be deducted through depreciation if used to generate income for your business. Under the new tax law the depreciation rate increased from 50% to 100% on equipment bought and placed into service after Sept. 27, 2017. For more information, visit IRS Publication 946, “How to Depreciate Property.”
Note that the ramifications of the new tax law are still being carefully reviewed by tax experts and Congress may make adjustments to the law. Before submitting taxes for 2018 be sure to consult a qualified tax professional who is current on all of the tax law’s changes.
Financial adviser, retirement wealth strategist, founder of Strategy Financial Group and author of “Climbing the Retirement Mountain” and “The Retirement Roadmap,” Calvin Goetz is an Investment Adviser Representative who holds the Series 65 securities license, is life and health insurance licensed in the state of Arizona and is a member of Ed Slott’s Elite IRA Advisor Group™ and the National Association of Insurance and Financial Advisors (NAIFA). For more information, visit StrategyFinancialGroup.com. The information is not intended to be used as the sole basis for a financial decision, nor should it be construed as guidance designed to meet the particular needs of an individual’s situation. Strategy Financial Group does not provide specific legal or tax advice. All individuals are encouraged to consult with a qualified professional before making any decision about their personal situation. Investment advice is offered through Strategy Financial Services, LLC, a Registered Investment Adviser. Insurance and annuity products are offered separately through Strategy Financial Insurance, LLC.