Although there are many tangible and non-tangible perks to being a self-employed contractor, it can be financially risky as there is typically no job stability, no company insurance and no employer-sponsored pension plan. However, you can do a lot of things to save money in your chosen entrepreneurial field. Whether you are a freelance writer or a self-employed electrician, you can take advantage of tax breaks and follow other cost-saving measures to help ensure your financial security.
1. Set up a home office, even if you don’t plan on spending much time there. Self-employed contractors who travel to client sites to perform manual work may not see a need for a home office, but establishing even a small space in your home can do wonders at tax season. Keep records of purchases of all your office supplies and resources, including computers, printers, fax machines, and landline and cell phones. You’ll also be able to deduct some of your commonly used utilities, such as Internet service and electricity, so keep track of those bills throughout the year as well.
2. Call your insurance company and get your car reclassified as a pleasure vehicle. If you’ve given up the daily commute to work primarily from home, you can save money on car insurance payments.
3. Buy home office equipment and furniture on a budget. For example, you can save money by buying a used desk from a consignment store. Join warehouse clubs as a small business, which is perfectly valid and legal even if you’re the only employee, to receive a membership fee discount. Also, if you buy a big-ticket item, such as a new computer, cell phone or scanner, do so by Dec. 31 so you'll be able to take advantage of equipment depreciation deductions in the upcoming tax season.
4. Join group health insurance plans to save money on medical and dental insurance. In group plans, self-employed people come together to buy group insurance at a discounted price, which is typically less than what you’d pay as an individual.
5. Separate your work and personal bank accounts, phone lines and credit card accounts. This will make tax time more efficient. Hire a local tax attorney or CPA to help you with your taxes. A tax professional will know the updated laws and be able to find tax loopholes that you may otherwise overlook.
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