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5 Tax Tips for the Unemployed

        Money | Taxes

1
Switch From Unemployed to Self-Employed

The recession has not only increased the unemployment rate, but it has convinced more and more Americans to break out on their own. In 2012, more than 30 percent of American workers are self-employed, many as freelancers, independent contractors or consultants [source:Goetz]. If you file taxes as self-employed rather than unemployed, you could cash in on some additional deductions. Just make sure you follow the Labor Department's rules for claiming unemployment insurance and you should be fine.

For starters, as a self-employed person you can deduct a portion of all expenses incurred by a home office. Now, it's important to note that a home office needs to be more than a makeshift desk in your bedroom. A qualifying home office for IRS purposes needs to be "exclusively and regularly" used for business purposes, which include searching for work [source: IRS]. Once you establish that home office space, you can deduct a portion of the cost of rent, Internet and telephone service, utilities, property taxes, and more.

Another perk of being self-employed is that you can deduct the entire cost of any health insurance coverage you buy for yourself or other family members. This is not an itemized deduction and is not restricted by any minimum percentage requirements.

Lastly, since you are running your own business, you have greater freedom to deduct expenses as business expenses. For example, a self-employed person can deduct the mileage from driving around to meet potential clients. The 2011 mileage deduction rate is 55.5 cents a mile, which adds up fast.

For lots more tax tips and helpful income tax info, explore the related links on the next page.


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