In an endeavor to soften the blow of self employment taxes and encourage entrepreneurship, IRS(Internal Revenue service)  has offered several deductions to self employed persons.

Learning about these avenues helps in claiming legitimate deductions on different expenses.

Let us focus on some tax deductions available to self employed.

Deductions on self employment tax: Self employment tax is referred to social security taxes and employer portion of Medicare costs. You can deduct half of the self-employment taxes from your net income.

IRS treats this tax as necessary business expenses and allows deductions accordingly. Another vital aspect that should be noted is – you incur self employment tax on your net income generated from the business after deduction of business expenses.

Deduction claim on home office: This involves complex calculations. In short, the business space used by you as office or operational area, owned or rented can be claimed as deduction in this bracket. Expenses that you can claim as deduction under this category include business percentage of rent or mortgage, homeowners insurance, property taxes and utilities that you need to pay for your business in a financial year.

If your business space comprises 20% of your home then you may claim 20% of your annual property tax as deduction. Make sure to keep the papers related to this deduction ready as these are prone to audit by IRS.

Health insurance premium: If you are self employed and pay your own health insurance premium, you can claim all your long term health care and dental care premiums as deductions. You can also claim deduction on the health premium you need to pay for your spouse and dependents. This is technically a personal level deduction but it is available only to self employed.

Meals and entertainment expenses, related to business are 50% deductible. Interest paid on business loans are tax deductible business expenses. In case you make business purchase with your business credit card, interest charged on it is tax deductible.

Car rentals used for business purposes are tax deductible. Standard mileage rate offered by IRS is most convenient for keeping record. You are also allowed deduction on expenses incurred on your telephone, internet and faxes used for the business.