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YEAR END TAX TIPS FOR THE SELF-EMPLOYED

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TAX TIPS FOR THE SELF-EMPLOYED

  • Establish a Simplified Employee Pension (SEP) Plan by the due date of your 2018 return, including extensions. The contribution to the plan must be made by that due date. For 2018, the maximum allowable contribution to a SEP an employee can make independently of an employer is $5,500 ($6,500 if a catch-up contribution). However, the maximum combined deduction for an active participant’s elective deferrals and other SEP contributions is $55,000 for 2018.
  • Alternatively, establish a Keogh Plan in 2018, before December 31. The full contribution to the plan need not be made until the due date of your 2018 return, including extensions.
  • Consider placing business assets in service in 2018. If qualified, Section 179 expense allows you to deduct the full cost of depreciable assets in the tax year they are placed in service subject to an expense level of $1,000,000 and the phase out threshold amount commences at $2,500,00 for 2018
  • For taxable year 2018, a taxpayer can deduct start-up expenditures up to $5,000 with the phase out threshold at $50,000.
  • A self-employed individual generally may deduct the employer-equivalent portion of his or her self-employment tax in figuring adjusted gross income. This deduction only affects the taxpayer’s income tax. It does not affect net earnings from self-employment or self-employment tax.
  • 100 percent of medical and long-term care insurance premiums, subject to the limitations on long term insurance premiums paid by a self-employed person are deductible from gross income to arrive at AGI.
  • Effective for payments made on or after March 30, 2010, the Affordable Care Act allows the self-employed health insurance deduction to include an adult child who has not attained the age of 27 before the end of the taxpayer’s taxable year.

2018 FEDERAL INCOME TAX RATES

Tax Rate Joint/Surviving Spouse Single Head of
Household
Married Filing Separately Estate & Trusts
10% $0 – $19,050 $0 – $9,525 $0 – $13,600 $0 – $9,525 $0 – $2,550
12% $19,050 – $77,400 $9,525 – $38,700 $13,600 – $51,800 $9,525 – $38,700
22% $77,400 – $165,000 $38,700 – $82,500 $51,800 – $82,500 $38,700 – $82,500
24% $165,000 – $315,000 $82,500 – $157,500 $82,500 – $157,500 $82,500 – $157,500 $2,550 – $9,150
32% $315,000 – $400,000 $157,500 – $200,000 $157,500 – $200,000 $157,500 – $200,000
35%  $400,000 – $600,000  $200,000 – $500,000  $200,000 – $500,000  $200,000 – $300,000 $9,150 – $12,500
37% Over $600,000 Over $500,000 Over $500,000 Over $300,000 Over $12,500

Like an annual physical examination is important for maintaining good health, an annual financial examination that includes year-end tax planning can enhance your financial well-being. We are here to assist you to achieve your tax and financial objectives. Contact us today.

 

 

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