Sole proprietors are business owners who do not have any registered partners that they work with. This does not mean that they do not have investors, it just means that they are only registered owner of their business. While taxes can be expensive for sole proprietors, they can also help with business costs when the business owner learns to take advantage of all of the write-offs they are entitled to. Business owners can write-off just about anything, but there are limitations.
Writing Off The Student Loans
There are thousands of potential business expenses that a sole proprietor can write off to help lower their tax burden, but the principal of their student loans is not one of them. Each student loan payment you make consists of principal, interest and fees. While sole proprietors would like to think that their education should be considered a business expense, the federal government disagrees and does not allow principal on student loans to be tax deductible.
What About The Interest?
If you meet the income requirements set up by the IRS, then you qualify to write off the interest you pay each year on your student loans. It may not sound like a lot, but a student loan of $20,000.00 at five percent interest is a write-off of $1,000.00. This would be enough to drop your taxable income to a lower bracket and significantly lower your tax burden.
Other Write-Offs
The interest on your student loans is not the only write-off you have a sole proprietor. All of the office supplies, postage and printer ink you buy throughout the year is tax deductible. Be sure to keep a detailed log of the miles you drive for your business because that is also a write-off.
If you work from home, then the percentage of your house that you use for business is a write-off up to a maximum. Part of your cell phone and Internet provider bills are also deductible if you use them for business, and any money you pay to maintain the office portion of your home is also tax deductible.
Entrepreneurs spend years in college learning their craft and preparing to start their own businesses. While their education is pertinent to their business, the principal on their student loans is not considered a business expense. But you may qualify to write off the interest on your student loans, and there are plenty of other deductions you can use to lower your tax burden as a small business owner.
Jim Treebold is a North Carolina based writer. He lives by the mantra of “Learn 1 new thing each day”! Jim loves to write, read, pedal around on his electric bike and dream of big things. Drop him a line if you like his writing, he loves hearing from his readers!