I live and work, quite literally, down the road from the main Microsoft campus. No surprise, then, that Im commonly asked by freelance consultants for free advice about how these self-employed independent contractors can minimize their income taxes.
If I can, I try to weasel my way out of the discussion, offering up such basic tidbits as, Well, be sure to look at the home office deduction. And make sure youre taking advantage of deductions for health insurance and pension funds.
Usually, those simplistic answers work. Everyone once in a while, though, I encounter some guy whos really motivated to save on taxes. Usually, someone now making good money consulting or contracting When I cant deflect their questions in some other way, I tell them about the three best ways that independent contractors have to save on taxes.
Technique #1: Smooth Your Income
Whatever you think of the US Internal Revenue Code, you need to know that its quite progressive. That progressivity means the more you make, the more you pay. The progressivity also means that if your income fluctuates, your income taxes go up even if you make the same money on average as someone...
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