Tax Tips for Self-employed

Q: I use my car for business. What expense records are required?

A: The law does not specifically require a log, but you are required to maintain records and a log is certainly a good tool.

Q: What is the mileage rate?

A: If you have elected to use the standard mileage rate method, the rate is $.325 for each business mile up until March 31, 1999, and $.31 thereafter. You can add parking and tolls to this amount.

Q: How much business equipment can I expense each year?

A: You can expense up to $19,000 of equipment each year, subject to certain limitations (especially for vehicles).

Q: Can I have my own retirement plan?

A: Yes, you may have a retirement plan for your business, even if you are the only employee.

Q: Do I need to keep receipts for all my meals?

A: You do not need receipts for meals under $75. However, you do need other documentation such as the time, place and business purpose of the meal.

Q: Can I deduct the self-employment tax I pay?

A: Yes, you can deduct one-half of the tax from your gross income on Form 1040.

Q: I am self-employed and pay all the health insurance for my family. What deductions are available?

A: Generally, you may deduct 60% of the premiums on Form 1040. The remaining 40% can be added to your medical deductions if you itemize. (See Minnesota Tax Tips for additional information.)

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