As a self-employed person, the one tax you can’t run from is the self-employment tax.

Your first $147,000 in wages and net earnings are taxed at 15.3%. This is separate from the income tax you also have to pay annually.

Net earnings are the key here. I’m sure many people find made-up expenses to make it seem like their self-employment is barely making a profit, but when you work remotely, there is not a lot of overhead.

You can deduct health insurance for your whole family. As well as a home office, phone, and internet.

But the only game changer for us is retirement contributions. However, those are also capped. You can only contribute 20% of your profit plus the standard 401K limit.

Let’s say you gross $80K a year in your business. And you have $10K in expenses. This makes your net earnings $70K.

You can then contribute $20,500 + (0.2)($70,000) = $34,500 to your 401K.

This would leave you with $35,500, which is taxable.

Maybe you deduct another $10K; you still have $25,500 taxable. You have to pay $3,900 in self-employment tax.

$70,000 – $34,500 – $25,900 = $9,600 taxable income. You would be required to pay $960 in tax, but you get a $2,000 per child credit, $1,500 of which is fully refundable. +$2,040!

You will get a tax rebate if you’re married with two kids!

Add in any state income tax you must pay ($475 for Illinois). You pay $1335 in taxes on a $70K net income. A 1.9% taxable rate. Not terrible, but how can you get that to 0%?

The only way to have 0% tax when you are self-employed is to either not make a profit or have enough refundable tax credits to offset your self-employment tax.

You may think, I will buy a new electric car and get $7500 back. But that tax credit is not refundable. It also doesn’t apply to self-employment taxes. So if you have $1000 in federal taxes and $4000 in self-employment taxes, you do not get a $2500 refund. You only get $1000 of that possible $7500.

The two most common refundable tax credits are Earned Income Tax Credit (EITC) and the Additional Child Tax Credit (ACTC). Unfortunately, you cannot get a refundable tax credit without children, as EITC’s income limits are meager.

If you are married with two kids, you have an adjusted gross income (AGI) of less than $55,529 and less than $10,300 in investment income; you qualify for EITC. However, AGI is calculated before the standard deduction. Therefore, you can subtract half your self-employment taxes and any self-employed health insurance costs. The EITC is also scaled based on your income, meaning if you are close to $55,500 in AGI, you get close to $0.

Every expense you can claim is crucial in saving you money when you are self-employed.

If you can decrease your net income, you can earn EITC and reduce your self-employment tax implications. Your tax savings will partially offset your expenses and can help you grow your business in your first years.