Being your own boss comes with a lot of perks—flexibility, control over your work, and the chance to build something you’re passionate about. But it also means taking on extra financial responsibilities, including taxes. Without an employer handling your tax withholdings, you have to stay on top of things yourself. Here are some key tax planning tips for self-employed individuals to help you keep more of what you earn and steer clear of tax-time headaches.

Understand Self-Employment Tax 

If you work for yourself, you don’t have an employer splitting your Social Security and Medicare taxes with you. Instead, you pay the full 15.3% self-employment tax on your income. If you make at least $400 from self-employment, you need to report and pay this tax when filing your return.

If you’re a sole proprietor or an independent contractor, you’ll use Schedule C to report your earnings and expenses. The net profit from that form is what you’ll pay self-employment tax on when filing your Form 1040.

Pay Estimated Taxes on Time

Employees have taxes taken out of each paycheck, but when you’re self-employed, you need to set aside money for taxes yourself. You’ll likely need to pay estimated taxes every quarter to avoid penalties and a big tax bill at the end of the year.

Deadlines for estimated tax payments are usually:

• April 15 (for January-March income)
• June 15 (for April-May income)
• September 15 (for June-August income)
• January 15 of the following year (for September-December income)

If you expect to owe more than $1,000 in taxes for the year, it’s best to make these payments. Check with your accountant to make sure you’re sending the right amount.

Hiring Family? Know the Rules

 Many small business owners hire family members, which can come with tax benefits. Paying your spouse or children for work they actually do in your business can reduce your taxable income. Plus, wages you pay them are tax-deductible business expenses.

However, the IRS looks closely at family payrolls, so make sure:

• The pay is reasonable for the work they do
• They actually perform the job
• You follow normal payroll procedures, like withholding taxes if required

If you hire your kids, special tax rules may apply depending on their age and your business structure. Talking to a tax professional can help you get it right.

Save for Retirement (Because No One Else Will)

Without a company 401(k) plan, it’s up to you to save for retirement. The good news? There are several tax-friendly retirement plans designed for self-employed people:

• SEP IRA – Easy to set up, and you can contribute up to 25% of your income.
• SIMPLE IRA – Best if you have a few employees; offers tax breaks for both you and them.
• Solo 401(k) – Great for higher-income earners, allowing big contributions (up to $70,000 in 2025 if you include employer and employee contributions).

These plans lower your taxable income, meaning you’ll owe less in taxes now while saving for the future.

Don’t Miss Out on Business Deductions

The more deductions you take, the less you’ll owe in taxes. Keep track of everything you spend on your business, because you may be able to write it off. Common deductions include:

• Home Office – If you work from home, you may be able to deduct part of your rent or mortgage. The simplified deduction lets you write off $5 per square foot, up to 300 square feet.
• Office Supplies & Equipment – Computers, desks, chairs, and even software can be deductible.
• Business Travel & Meals – Travel costs are 100% deductible, and meals are 50% deductible when for business purposes.
• Health Insurance – If you’re self-employed and pay for your own health insurance, you may be able to deduct the full premium cost.

Keeping good records and saving receipts is important. If the IRS ever asks, you’ll need to show proof.

Keep Up with Tax Changes

Tax rules change often, and staying updated can help you avoid surprises. For example, the IRS recently changed how it tracks payments from apps like Venmo and PayPal for business transactions. If you receive over $600 in payments, you’ll get a 1099-K form, and that income needs to be reported.

Tax deductions and rules can also change, so it’s always a good idea to check with an accountant or financial advisor to make sure you’re maximizing your savings.

Running your own business gives you freedom, but it also means more responsibility—especially when it comes to taxes. Planning ahead, taking advantage of deductions, and working with a tax professional when needed can save you money and stress in the long run.

And remember, the IRS is much more expensive than a good accountant.

Have questions or need some help with your tax planning? At Navalign Wealth Partners, we’re always here and happy to assist you. Give us a call today.