Better Tax Breaks for the Self-Employed for 2003

Health Insurance Deductions for the Self-Employed

Beginning 2003, the self employed can deduct 100% of their payments of medical insurance premiums for themselves, their spouses and their dependants.

Bigger section 179 expensing deductions

Rather than depreciating your office equipment and improvements to your investment real estate you can now expense them and write off 100% in the first year.

The limit has been increased from $25,000 to $100,000 for 2003, 2004 and 2005.

Let's say you buy a new computer for $2,000. A $2,000 write-off reduces your taxes by $500 if you're in the 25% tax bracket.

You can even write off up to $100,000 for the purchase of a new SUV in the year it is purchased so long as the vehicle is used for business purposes and weighs more than 6,000 pounds. How's that for encouraging fuel conservation?

You need to use IRS form 4562, Depreciation and Amortization. Your tax preparer will know what to do.

Pay Your Kids

Pay your kids for helping in your business. You are allowed to pay your kids reasonable wages for doing REAL work.

For 2003 they can earn up to $4,750 without paying taxes. IRS code 3121(b)(3)(A) exempts the wages you pay to a child under 18 from Social Security taxes provided:

1. You are a sole proprietor, not a partnership or corporation or
2. A husband-wife partnership.

As always, this article is intended to be accurate but is not intended to replace tax advice from a competent professional.

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