What deduction are you talking about?
A tax deduction is an amount on which the state allows you not to pay tax. And they are different.
For example, for the self-employed there is a special tax deduction. By default, they must give the state 4% of the income received from individuals, and 6% from legal entities. But thanks to the deduction, rates of 3 and 4% will apply until the amount saved on taxes reaches 10 thousand rubles.
This deduction is due to all self-employed people, nothing needs to be done to receive it. The tax office itself will provide it and calculate everything. And if you opt out of self-employment without using the full deductible limit, it will continue to apply after you renew your status. So everything is quite simple here.
But often, when asking about a tax deduction, they mean other types – standard, social, property, and so on. These deductions allow you not to pay part of the taxes or to return the amount already transferred if you have a child, you were treated, studied, bought an apartment, and so on. You can read more about all these deductions in a separate article. In the meantime, we will figure out how things are with tax deductions for the self-employed.
What are the conditions for receiving a tax deduction for the self-employed?
We will not go into details, we are only interested in one condition. A tax deduction from among those described above (except for the self-employed, of course) implies that you can not pay or return part of the personal income tax (PIT) at a rate of 13%.
Accordingly, those who do not pay personal income tax are not entitled to these deductions. The self-employed pay tax on professional income (PIT) at the rates of 4 and 6%. Therefore, the conditions do not fit.
But self-employment in itself is not an obstacle to receiving a deduction.
So there are nuances here.
In what cases can a self-employed person apply for a tax deduction?
Sometimes it is still possible. However, personal income tax should still come into play. This happens in the following situations.
You also pay VAT
Self-employment from this point of view is a very convenient mode. It can be combined, for example, with work under an employment contract. That is, you yourself pay tax on professional income for your additional activities, and the employer deducts personal income tax for you. Or, for example, you paid personal income tax yourself – sold the car or received an expensive gift from the company.
And with personal income tax, you can already get a tax deduction for education, treatment, and so on. Fill out the declaration and submit it.
Do you want to receive a tax deduction for the sale of a property?
If you owned some property is less than three years old (for real estate in some cases less than five) and decided to sell it, the income is subject to personal income tax. They have to pay the state 13%. But there is two deductionswhich help to give less:
- A $1 million deduction for real estate and $250,000 for everything else. If the property was worth less, you can not pay tax at all. If it is more expensive, personal income tax is paid on the difference between its price and the amount of the deduction.
- Deduction for expenses. Once you bought your property and paid money. Therefore, income for you is not everything that was transferred to you, but the difference between revenue and initial costs. This option is suitable if there is something to confirm the expenses.
Both deductions are also available to the self-employed because they reduce the amount of personal income tax that must be paid.
Do you want to apply for an investment
self-employed available two of the three types of investment tax deduction:
- For income from the sale of securities if they have been owned for more than three years.
- For income from transactions with securities made on an individual investment account within three years.
Here again, everything is tied to personal income tax: you would have to pay it, but thanks to the deduction, you won’t have to. But it will not work to issue a deduction for the amount of funds deposited to an individual investment account within three years, since it implies that you give personal income tax from income not related to investments.