Benefits of Being a Sub-Contractor (Independent Contractor or Self Employed) As a Sub-Contractor, you have many benefits that are not available to most employees. 1. If you have an office in your home, which can be just a portion of a room, but which needs to be used “regularly and exclusively” for business, you will be able to deduct a portion of your mortgage, real estate taxes, utilities and repairs as business expenses. 2. You will be able to deduct your computer and printer (or the business portion of it) as a business expense, as well as a portion of your Internet fees. 3. If you need to drive your vehicle to meetings or training, you must keep a mileage log, but will be able to deduct that mileage from your income. Mileage rates are adjusted each year to account for inflation and high gas prices. An alternative is to deduct actual expenses and depreciation. 4. Continuing education (training) is deductible. 5. Supplies used in the business (paper, pens, highlighters, etc.) are deductible. 6. If you pay for health insurance that becomes an adjustment to income (reduces your taxable income). 7. Any equipment you purchase (headsets, new computer, printer, scanner, fax) for use in business can be depreciated or expensed to reduce your taxable income. 8. You can fund your own retirement plan and deduct the allowed amount from your income. 9. If you need to travel for work, the expenses for hotels, airlines, and meals (1/2 for meals) are deductible. 10. Your phone and/or cell phone may be deductible. 11. If you work from your home, you can work in your jammies! Downsides to Being a Sub-Contractor 1. You will pay the entire Self Employment Tax (social security tax that as an employee you would pay half), which is 15.3%. 2. You will have no withholding from your pay checks and probably will need to make estimated payments. Your tax professional can help you determine how much should be withheld and sent to the IRS and to your state if you have state income taxes. Disclaimer: This is not intended to be tax advice. A tax professional’s advice should be sought regarding your personal situation.
Posted on: Tue, 11 Jun 2013 18:23:46 +0000
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