You can deduct a lot of expenses if you're setting up a new business -- or just doing some freelance work. By Kimberly Lankford, Contributing Editor January 11, 2010 I’m a pediatric nurse practitioner, and I just started a business in November making house calls. What do I need to know about taxes, and what can I deduct?Congratulations on your new business. Here’s what you need to know about taxes and some strategies that can help lower the bill -- whether you have a full-time business or just do some freelance work on the side. You’ll need to submit Schedule C to report your business income when you file your 2009 tax return and will also need to file Schedule SE to figure your self-employment tax if your net earnings for the year are more than $400. Sponsored Content But the good news is that you can deduct a lot of expenses, especially when you’re setting up your business. Advertisement You can deduct the cost of equipment you buy for your office, such as a computer, fax machine, shredder, filing cabinets, phone system and a dedicated business phone line. You can also deduct the cost of advertising, mailing, business software and accounting fees, medical licenses, professional organization dues, expenses for education in your field, and travel expenses and fees for medical conferences (generally, only 50% of business meals are deductible). You can write off the cost of renting an office. Or, if you use a dedicated space in your home exclusively for your business, then you can take the home-office deduction, which lets you write off a portion of your rent or mortgage interest, utilities and homeowners insurance (based on the percentage of your home you use specifically for your home office). See the IRS’s Tax Topic on Business Use of Your Home for more information. You can also deduct 55 cents a mile for house calls made in 2009, and 50 cents a mile for such trips in 2010. Keep a log of your mileage. You can also deduct the cost of medical equipment you purchase for your business. These expenses may be deducted entirely in the year you paid them, unless the costs are larger than your business’s net income for the year. If that happens, you may be better off depreciating those costs over several years, says Robin Christian, senior tax analyst with the Tax & Accounting business of Thomson Reuters. For more information about what you can deduct, see IRS Publication 535 Business Expenses. If you have a gain for the year, you can make tax-deductible contributions to a small-business retirement account, such as a solo 401(k) or a SEP-IRA. You can contribute up to $16,500 to a solo 401(k) for 2009 plus 20% of your net business income (business income minus half of your self-employment tax), up to a maximum of $49,000 in 2009. You cannot contribute more than your business income for the year. Or, you can contribute 20% of your net business income to a SEP-IRA, up to a maximum of $49,000 in 2009. You had to set up a solo 401(k) by December 31 to contribute for 2009, but you have until April 15, 2010, to set up a SEP-IRA. Advertisement You may also need to start making quarterly tax payments. Uncle Sam expects you to pay taxes on your income as you earn it throughout the year. If you or your spouse has taxes withheld from another job, you may be able to increase the amount you’re withholding to account for the business income. But if you expect to owe at least $1,000 in tax for the year, you may need to file quarterly estimated taxes to avoid an underpayment penalty (see Form 1040-ES). For more information about small-business taxes, see our Tax Toolkit for the Self-Employed and the IRS’s Small Business and Self-Employed Tax Center. Got a question? Ask Kim at firstname.lastname@example.org.