E. Saving for Retirement. Generally, taxpayers saving for retirement may contribute up to $5,000 ($6,000 if over age 50) to an Individual Retirement Account (IRA).
Tax Tip: Self-employed individuals seeking a greater contribution rate (as much as 18.5% of profit) may find it beneficial to establish a Simplified Employee Pension (SEP-IRA).
F. Health Insurance. Self-employed consultants may deduct the cost of premiums for medical, dental, and long-term care expenses for themselves, their spouses, and their dependents, so long as they are not eligible to participate in coverage in a spouse’s employer-sponsored plan.
Tax Tip: Younger, healthy individuals who may go months or years without visiting the doctor, may find it more cost beneficial to contribute to a Health Savings Account while enrolling in a high deductible catastrophic health insurance plan.
A Small Employer (less that 25 employees, with average pay of less than $50,000 per employee) may be eligible for a credit of up to 35% of the premium cost of providing healthcare coverage.
Tax Tip: Thought the credit begins to phase out gradually for companies with average wages above $25,000 and 10 full-time workers, the credit does increase to 50% in 2014.
Sole proprietors who file Form 1040 and partners and S-corporation shareholders who report their income on Form 1040 use Form 8941 to calculate the small employer health care credit and claim it as a general business credit on Form 3800.
Businesses without tax liability this year may carry back unused general business credits (including the small employer health care tax credit) five years and carry forward the credit to offset future tax liability.