Self employed startup costs

abbie · Apprentice Joined: 17 Oct 2006 Posts: 6

Hello! I quit my job several months ago because of misunderstanding with my boss. After a lengthy lay-off I have decided to start my own small business. I have heard that there is big startup costs when you are self employed. When I start a small business, can I deduct my start up? Is there a way to wait until the end of the year to start paying taxes? Will I be entitled to any special deductions when I become self employed? Is there any difference when paying Social security and Medicare taxes between employees and self employees?

gabey · Apprentice Joined: 08 Oct 2006 Posts: 4

Startup costs include any amounts paid in connection with making an active business. Business startup costs are generally capital expenditures. However, you can elect to deduct certain amount of money which depends from the state economic policy. You elect to deduct the startup by claiming the deduction on the income tax return for the tax year when you start the business. The election applies when calculating taxable income for the current tax year. When you start making money as a self employed you will probably have to pay some income taxes. You must be sure that you have paid enough to cover self employment tax or risk getting a penalty. There are no differences in amounts of paying Social security and Medicare taxes. Only difference is in the way of paying. As self employed you are paying the total amount of taxes. As employed, both you and your employer pay half of these taxes. But this, of course, has an effect when your employer determines your salary. Good luck with starting your business.

Self employed startup costs

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