Health Care Issues

• When you become self-employed, you will have to figure out what to do about your health care issues. As an employee, you most likely had your health insurance through a group plan. Once you become self-employed, you will have to get your own health insurance. A popular choice for self-employed individuals is to get an insurance plan that is compatible with a health savings account. This allows you to save money on a pre-tax basis to help pay for medical expenses.
  
  

Self-Employment Tax

• Once you are self-employed, you will also have to deal with the self-employment tax. This is the amount of money that you have to pay for Medicare and Social Security. When you work for someone else, the employer covers half of those expenses. Now that you are self-employed, you will have to pay the entire amount. For both expenses, you will have to pay 13.3 percent of your income. The rate before 2011 was 15.3 percent, but the 2010 Tax Relief Act changed that number to 13.3 percent for 2011. The rate is made up of 10.4 percent for Social Security taxes and 2.9 percent for Medicare.
  
  

Deductions

• Even though you have to pay more taxes through the self-employment tax, you do get access to more tax deductions when you are self-employed. You can deduct any legitimate business expenses that you may have from your taxable income. You can make deductions for a home office if you work from home. You also get to deduct the amount of money that you pay in health insurance premiums for the year. The amount of money that you pay in self-employment tax can also be deducted from your personal taxes.
  
  

Business Plan

• When you become self-employed, you may also want to create a business plan to guide your actions. Many people in this situation do not have a business plan and simply drift through each day without purpose or meaning. This often leads to uninspired work and not being as effective as you possibly could. By creating a business plan and setting business objectives, you can stay on task and be more successful as a self-employed individual.