Who here is knee deep in tax season? Well fear not, because we have guest expert Melissa Whaley of Whaley Bookkeeping diving into all things that deal with deductions, just in time for tax season!!! Get your pen ready, because she is sharing with us the common deductions that we need to be claiming for our business...
Taxes may not be your favorite thing in the world, but I can bet that it’s lot more exciting when you discover you owe less than expected. This dream could indeed become your reality if you’ve been missing out on deductions in your business. There are a few things to note in general about business deductions before we dive into specifics. First, every industry is a bit different and will have different deduction that apply to them, this is why you are supposed to select your business industry code on your tax form when filing your annual return. Second, while there are a ton of different types of deductions, you aren’t going to be able to deduct much of anything if you don’t have the documentation to back them up. It may seem like unnecessary work now, but in the event of an audit later (which often happens years later) you will save yourselves hours upon hours of work and keep from losing all your deductions.
No, I don’t think you’re stupid. However, how many times have you been roaming the aisles of Target or Walmart while buying personal items and just happened upon a few cute pens/notebooks/planners that would be perfect in your office? I bet you just threw it in with your cart full of personal items and never thought about it. Next time you pick something up for your business or office I want you to set it aside and ring it up separately from your personal items (and use your business card). The cashiers don’t mine, and it will be easily distinguishable as a business expense. The amount that adds up over a year might surprise you.
Training and Reference Materials
Whether it’s a fantastic course you bought, that business book you’ve been eying on Amazon for months, or a simple PDF guide. Those purchases can add up quickly (either to our benefit or detriment) and are most definitely deductible in your business. It doesn’t have to be industry specific training to count as a deduction for your business. So watch which account your using to pay for Kindle books and Paypal, you could be losing deductions by paying with your personal account instead of business.
Your Home Office
Oh this is a BIG one, and not something I recommend if you aren’t ready to do the work to prove your legitimate home office. I will say though, that way too many business owners avoid this goldmine deduction out of fear. Let me calm some of your fears! Back in the day, (pre 1999) there were much stricter rules regarding home offices, hence people just didn’t mess with it. However, new laws went into effect in 1999 that significantly changed the rules regarding home offices, and thus opened a new window of opportunity for most of us who work from home. The good news is that your office space does not have to be a completely separate room, it does however have to be used regularly and exclusively for work. So even if it’s a closet, half a spare bedroom, or storage in the garage; these spaces used primarily for business can be factored into your home office deduction.
The risk of audit is significantly reduced, but that doesn’t mean your should be frivolous with this deduction. You need to measure square footage, do some documentation of the actual space (think photos and floor plan), and make sure your business is actually profitable before you go diving into claiming your home office. There are some great books that will give you more insight, but the best resource will be a well qualified tax professional.
Chances are if you go out of town for events, or to work with clients, then you probably eat during those trips. While you can (and should) track your actual expenses for meals while traveling, you might find that using the IRS’s per diem meal rates give you a bigger deduction, especially if you are traveling to high cost of living areas. This is in addition to deducting your airfare, taxi, and hotel stay,
You can use the lookup tool on the GSA website to help you get numbers https://www.gsa.gov/perdiem
Did you find something you were missing? I get really excited when I discover new deductions for business owners (because yes they do change a bit every year). If you’re interested in learning more about deductions and how your business can achieve lower tax bill then check out my video deduction training at http://www.melissawhaley.com/deductions
I’m Melissa, licensed Tax Pro, Bookkeeper, and California girl. I helps entrepreneurs reduce their stress and get their finances in order. You can find more about me at: