What to Claim on Taxes When Self-Employed

Insurance and Retirement

Self-employed individuals can deduct 100 percent of medical insurance premiums for themselves, their spouse and dependents when filing their federal tax return. The medical insurance deduction comes straight from the total income rather than from adjusted gross income. Like medical insurance premiums, retirement contributions are deducted from the total income with the exception of Roth IRAs. Self-employed individuals can put the maximum allowable contribution into retirement accounts, which varies depending on the type of account, to reduce their taxable income.

Any business expense considered "ordinary" and "necessary" is deductible on federal income taxes. Ordinary and necessary means the expense is normal for your industry and helpful to your business. For example, if you are a computer programmer, a computer would be ordinary and necessary, while a table saw would not. While most business expenses are 100 percent deductible, some, such as home office expenses, vehicle expenses, gifts and client entertainment costs, are only allowed partial deductions.

Any use of your vehicle for business tasks can result in mileage deductions or vehicle expense deductions, but not both. Which deduction you choose requires looking at the potential deduction of each and choosing the higher amount. To determine a mileage deduction, multiply the amount of miles used for business-related driving by the standard mileage rate, which is set by the IRS. The resulting dollar amount is the mileage deduction you are eligible to claim. Compare the mileage deduction with the total expenses for gas, oil, tires and preventative maintenance of your vehicle when used for business tasks. A vehicle expense deduction typically is better for individuals who do minimal driving or have a low-gas-mileage vehicle.

To claim the home office expenses deduction, your office must be used exclusively for your business, and you must use it as your primary business location. If you are eligible to claim the home office as a tax deduction, you can claim the same percentage of your mortgage, property taxes, home insurance premiums and utility bills as the percentage of your home's square footage taken up by your office space.