The 2021 Income Campaign has reached its final extension, ending on June 30, and many taxpayers are still weighing how this affects their year’s tax return. For the self employed and independent contractors, there is an opportunity to deduct certain expenses when calculating taxable income. Unlike traditional employees, freelancers and business owners benefit from a clearer view of which deductions can reduce the overall tax liability on their liquidation statements.
The key point is that the rules for deducting expenses from revenue are well defined. The deductions should be tied directly to business activity. A self employed individual must retain all invoices and record every expense and investment in a ledger to substantiate these deductions.
One of the most significant and often overlooked deductions is the cost of renting space for business activities, including office or coworking spaces. Wages and salaries paid to employees are also a factor, along with other personnel expenses such as in-kind compensation, travel allowances, and rewards meant to support the team.
The penalties the tax authority can impose for late rent reporting
In addition, personnel costs are deductible when they relate to education, insurance protection, pension contributions, and compensation. The services of independent contractors and external suppliers such as advertising and transportation are also deductible. For those who telework as self employed, a portion of utilities like electricity, water, and internet can be claimed as a business expense.
Payments to Social Security, including amounts for employees, quotas under a special regime for self employed workers, and taxes such as property tax, business activity tax, and contributions to partner associations and other levies are all part of the deductible expenses. Interest on business loans is also deductible. In addition, self employed individuals who file quarterly VAT returns may deduct input VAT.
Clarifying questions about the income statement
Costs for raw materials and supplies, travel fuel and other goods essential to operations, and repairs and maintenance of equipment that reduces its value can be reflected as deductions on the income statement. This helps ensure a more accurate picture of business profitability and tax obligations.