If you make money as a work at home mom, now is the time to add “taxes” to your endless list of things to do. While you should always consult a qualified tax professional to guide you in your self-employed tax obligations, there are four critical money-moves you should make before year-end, to maximize your work at home mom tax benefits.
Invest in your golden years. When you are a stay at home working mom, retirement is one area where Uncle Sam is on your side, so use the benefit to your advantage. Self-employed individuals can establish either a simplified employee pension plan (called a SEP-IRA), to make retirement contributions up to 25% of self-employment net earnings, or a SIMPLE IRA Plan, which allows for contributions up to $11,500 of your 2011 self-employed net earnings. Research plans thoroughly to determine which will suit your needs best, but compared to a traditional IRA (which has a maximum contribution of $5,000 or $6,000 depending on your age), the tax benefits are worth the research. You should also confirm when you can contribute for the 2011 tax year; many IRA plans allow for contributions until April of 2012, while 401K and 403(b) plans usually require that eligible funds be invested by December 31st of this year.
Check in with the doctor now. If you’ve been putting off a trip to the doctor, optometrist or dentist and you have a flexible healthcare spending account (HSA) with unused funds in 2011, make an appointment now to see your medical provider before the end of December. These accounts are “use it or lose it,” and many doctors become tough to see during the holidays. If you don’t have pressing medical needs, but you do have money in an HSA, use the remaining balance to refill recurring prescriptions that you know you’ll need.
You should also take a moment to add up your medical receipts for 2011. If you have medical expenses that were not reimbursed and they total more than 7.5% of your adjusted gross income (AGI), they may be tax deductible. If you have a pending procedure and the cost of it will push you into the deductible range, it may be worth taking care of before year-end.
Invest in education. If you or anyone in your family has plans to attend college, contribute to a 529 Savings Plan in 2011 (contributions must be postmarked by Dec. 31). Whether you will use the money in the near future, or years from now, there are no federal or state income taxes on the earnings, as long as the cash is used pay for an education-related expense like tuition, room and board, or books. Depending on the plan you choose, your contribution may also qualify for a state income tax deduction.
Stephanie Taylor Christensen is a former financial services marketer turned stay at home working mom, yoga instructor and freelance writer covering personal finance, small business,consumer issues, work-life balance and health/wellness topics for ForbesWoman , Minyanville , SheKnows , Mint , Intuit Small Business, Investopedia and several other online properties. She is also the founder ofWellness On Less and Om for Mom prenatal yoga. Stephanie wrote this feature article exclusively for Debbie May.com (http://www.DebbieMay.com), an organization dedicated to helping small businesses succeed.