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Question:


For self-employed persons, what’s the most commonly overlooked tax deduction?
-JoFit


Answer:


It’s hard to name the deductions that are most overlooked because there is no way to know for sure how many self-employed individuals would have been eligible to take them. But one way that the self-employed may be costing themselves a lot and that is not discussed as frequently as it ought to be is not the result of a deduction that they fail to take but rather a strategy that they fail to implement when considering when to take deductions. The timing of expenses is often discretionary. The purchase of equipment may be pushed back to next year or moved up to this one. The same goes for a business trip and even the payment of certain taxes. By paying the most in deductible expenses during fat years, when income is particularly high and your marginal tax rate – the rate at which the top slice of income is taxed – is also high, it may be possible to pay a lower average rate, and therefore incur a lower average tax liability, on the same average income over the course of several years. As always with complicated tax issues, however, you need to do your homework or else pay a solid professional to do it for you.
-Conrad de Aenlle



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