 |
| |
| |
| Good morning! I'm Elisabeth Buchwald, here with one of your last special tax season editions of The Daily Money. |
| Today I'll be walking you through what you need to know when filing your taxes if you're a member of the Great Resignation. More specifically, if you quit your job last year to start your own business. |
| For context, more than 47 million people quit their jobs last year. In the same year, a record 5.4 million new business applications were filed, according to Census Bureau data. |
| One of the major benefits of becoming self-employed is you qualify for TONS of tax deductions that traditional employees don't. For instance, you may be able to deduct part of rent or mortgage payments if you work from home, on top of other home office expenses for which regular employees don't qualify. You can also deduct your health insurance costs. |
| TurboTax has a free Self-Employed Expense Deduction Interactive that can help you identify self-employed business expenses related to your specific industry. You can use their tool even if you aren't filing your taxes with TurboTax. |
| In general, tax deductions lower your taxable income. So if you earned $100,000 in profits last year from your business but you spent $7,000 on health insurance, your taxable income would be $93,000. |
| Collectively, all the tax deductions could very well push you into a lower tax bracket than if you earned the same amount of money as an employee, said Jay Soled, a professor and director of the master of accountancy in taxation program at Rutgers University. |
| Two of the biggest cons of becoming self-employed are you have to make quarterly tax payments for the estimated amount of tax you owe and you pay a higher tax rate. |
| All workers are required to pay a 15.3% tax on income that funds Social Security and Medicare. As a W-2 employee (i.e. you work for an employer), you're responsible for only half of that. Your employer pays the other half. |
| Self-employed workers must pay the full 15.3%, but only for the first $142,800 of net income, meaning what you earned minus any tax deductions for which you may qualify. Above that threshold, you're required to pay only an extra 3.9% tax on your earnings. |
| But being your own boss may be priceless, especially if you were miserable at your prior job. Plus, you never have to worry about getting fired or begging to get a vacation day. |
| And if you're interested in learning more about anything I mentioned *shameless self-plug* check out my story for USA TODAY on self-employed taxes. |
Your weekend tax break |
| Fox made a lot of headlines this week and it had nothing to do with Fox News. An actual, literal fox on Capitol Hill bit nine people, including one congressman and a Politico reporter. The fox was eventually captured, euthanized, and tested positive for rabies, but her spirit lives on in her Twitter account. |
| Elisabeth Buchwald is a personal finance and markets correspondent for USA TODAY. You can follow her on Twitter @BuchElisabeth |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
No comments:
Post a Comment