Your Self Employed Hidden Paycheck – Little Things Add Up (Part 2)

Most articles focus on self employed taxes and the tax savings aspect. Oh yeah, I also saved $6610 last year in self employed taxes from this. But this article focuses on the hidden paycheck produced by legitimately buying using the business what also has personal benefits.

Make sure you check with your CPA before you take any of these deductions since your situation is most certainly different.

My Self Employed Hidden Paycheck items for 2008:

Self employed health insurance - First, the big one. As an employee, it's not deductible even if you pay the whole thing. Being self employed, it's entirely deductible. I spent $5068 last year.

Cell phone - I have five lines for my family. These cost $179 a month after subtracting the kid's lines although all are necessary to my business and my sanity.

Home/business phone - Working from home allows me to write off my phone ($45/mo) and my long distance VOIP line with BroadVoice ($35/mo).

Internet - My Internet at home costs $50/mo. Who could run a business without that?

Lunches/dinners out - Meeting with clients and prospects over lunch or dinner is a relaxing way to build business. Even after the 50% deduction, I spent $129/mo.

Party leftovers - My client party at my house had 146 clients and prospects last year. In Berks County, it's a mortal sin to run out of food, so I ended up with a steak, shrimp, appetizers and alcohol left to freeze. Although extremely hard to estimate, I would say safely about $500 total was the value of what we ate later in the year with family and friends.

Travel - I have a lot of clients near San Jose, California where I used to live, many began as close friends. Traveling there three times last year to see them and the clients they refer is like a vacation for me. Since I stay with my mother-in-law (who I just love), I only spent $2772 on three trips last year.

Vacation - When many people go on vacation, they work part of the time and deduct part of the cost. I didn't last year, so my business deductible vacation was $0. This can be a significant amount as we will see in a future article.

Home office deduction - Working from home allowed me to take $3484 last year off my taxable income. Think of it as the business paying part of the electric, mortgage, pool maintenance, and everything that goes into maintaining a house divided by the square footage used for your business.

Per diem meals - I found this little known tax deduction that works for me because I stay at my mother-in-law's house when I visit my clients in CA. Per diem meals is a daily rate based on where you travel allowed for deduction where you don't need a receipt. California is $59/day and I spent 47 days there last year. So I get to take $2802 as business expenses.

Office supplies - With two teenagers in school and various Boy Scout projects, we use extra paper supplies such as paper, toner, and notebooks. Maybe it's not worth mentioning at only about $200 a year. But it illustrates that there are probably things you haven't thought of yet.

Auto mileage - If you routinely stop at the grocery store, department store, or friend's house on your way home from a client or meeting, you have saved yourself a trip and pocketed the mileage. Make it a habit and it is money your household is getting without spending. With 55 cents a mile, that was around $1294 last year.

Computer equipment - Who could run a business without a computer? It's also personal entertainment, shopping aid, and correspondence tool. We tend to buy a laptop about every year for either my husband or me and give the older one to our kids or assistants. Patrick's MacBook and all its software, cases and parts was $2052. Yes we bought other computer stuff, but I'm only counting here what we would have had to buy for the family (and unable to deduct) if we weren't self employed.

Telephone equipment - Between dropping my Ipaq and being a woman with the ‘no pockets' problem, I need to upgrade my cell phone nearly each year. Without extending my contract, it cost $299. At home we have a TalkSwitch PBX which died after 5 years and we replaced it for $826.

NOW, a big disclaimer. I do not do taxes! I work with a totally excellent CPA who specializes in self employed taxes and helps me. Then I pass onto my self employed clients whatever they are missing. So if you have any questions whether something is a business deductible in your situation, ask your CPA. I am only helping stimulate your brain and get this stuff recorded in the first place. You can't count it if you don't track it.

How do you figure your hidden paycheck?