About self employment

[LL36]

Is it true that you can write off half of your self-employment tax? I read this on a business website.

Is it also true that you can fund an IRA until the tax deadline?

Can you recommend anything a self-employed person can do to help reduce tax liability besides the normal deductions? 

[ColeenD3]

You don't exactly write off half of your SE tax. On Schedule SE, half of your tax due is automatically added to line 10, 1040, and acts as an adjustment to income.

If you pay health insurance, that is also another adjustment to income. You will be guided through expenses on your Schedule C.

Please see this LINK for additional information.

[Contented · Accepted solution]

Yes, you can fund an IRA up to the deadline, but give your financial institution a few days to make sure it is done. You must also let them know that the funds are for 2021 and not 2022.   Lastly, you can only fund it up to the amount you profited (after expenses) on your business or $6,000 whichever is less.  ($7,000 if you are over 50 years old.)   You can choose between a traditional IRA, which will lower your taxable income for 2021 or a ROTH IRA, which will tax you now, but allow the money to grow tax free.  Check with your financial institution for particular rules on withdrawing from the IRA and ROTH in the future.  If you wish to put more toward retirement in 2022 from your self employed income you may wish to consider opening up a SEP or SIMPLE IRA. 

[Contented]

If you paid for your insurance through a health insurance marketplace (Ex. Covered California) then you will enter your 1095-A information and there will be a place to check that you are self-employed. It will automatically put the information in the right place so you would not need to put it on Schedule C.  That is my understanding, but I am a customer, not an employee of Turbo Tax.  Just be careful not to count the insurance premiums twice.   If you had other insurance available to you, such as on a spouse's plan, but chose not to use them then you may not be able to count your payments.