Photo by lepiaf.geo

Running your arts business isn’t easy. Besides creating your art, you also have to be the chief cook and bottle washer, taking care of the many details that keep the business end of things running smoothly. Daniel Isenberg, a former entrepreneur and management practice professor, examines the personal qualities and mind set that tend to be common amongst the successfully self-employed. One thought that caught my eye:

On the average, people who set up their own businesses don’t make more money, although a few do succeed in grabbing the brass ring. But the “psychic benefits” — the challenge, autonomy, recognition, excitement, and creativity — make it all worthwhile.

Learn more about the challenges of business ownership and take his 2–minute Isenberg Entrepreneur Test.

Dear Rex,

I’m a self-employed musician and pay for my own health insurance.  How much of this can I deduct?

–Healthy Artist

You may be able to deduct premiums paid for medical and dental insurance and qualified long-term care insurance for you, your spouse, and your dependents.  To qualify, you must be a self-employed individual with a net profit reported on Schedule C (Form 1040), Profit or Loss From Business, Schedule C-EZ (Form 1040), Net Profit From Business.

The insurance plan must be established under your business.  For Schedule C filers, the policy can be either in the name of the business or in the name of the individual.  However, you cannot take the deduction for any month you were eligible to participate in any employer (including your spouse’s) subsidized health plan at any time during that month.

If you earned more than $400 during 2009 from work as a sole proprietor or independent contractor, you may owe self-employment tax. That’s true no matter what your age – even if you’re receiving social security benefits.

The tax is assessed on your earnings from self-employment, which can include income from qualified joint ventures and partnerships, as well as fees you earn working as a director for a corporation. In this context, “earnings” generally means your income after deducting expenses incurred while operating your business. If you have multiple businesses, you combine the net income and losses.

For your 2009 return, the self-employment tax rate is 15.3% of the first $106,800 that you earned. Income above the base is still subject to Medicare tax at a 2.9% rate.

What happens when you earn social security wages or tips from an employer and also have a side business? Your wages count toward the taxable base. Depending on how much you earn as an employee, your self-employment income may be subject to part or all of the tax.

You can pay self-employment tax on a quarterly basis as part of your estimated tax payments. One half of the total self-employment tax that you pay during the year is deductible on your income tax return, and you don’t have to itemize to claim the deduction.