Life is expensive, from business expenses to personal expenses to paying Uncle Sam on April 15. Wherever you go, it may seem like your wallet is open. One way to save money each year is to find legitimate tax write-offs that intersect both personal and business expenses.
As a certified public accountant, everywhere I go, even when I'm at dinner with friends, I constantly am asked the question: "So, what can I write off my taxes?"
Surprisingly, there isn't some master list included in the Internal Revenue Code or provided by the Internal Revenue Service. There is simply the tax principle set forth in Code Section 62 that states a valid write-off is any expense incurred in the production of income. Each deduction then has its own rules.
A good CPA should be teaching their clients to think above the line -- that is, your Adjusted Gross Income line. Your AGI is the number in the bottom right-hand corner on the front page of your tax return. Any tax return. And what I mean by thinking above this line is constantly trying to think of any and all personal expenses that may have a business purpose. With a small-business venture in your life and on your tax return, you may be able to convert some personal expenses to business expenses, as long as you have the proper business purpose for that expense.
Seasoned business owners become proficient over the years at keeping good records and realizing when expenses have a legitimate business purpose. For some, this thought process becomes so ingrained that it becomes almost impossible to buy something without first considering a tax purpose for that item or service.
Consult this list of 75 possible tax deductions for business owners. It's just a start and not every one of these items is always a legitimate deduction. For example, you may be able to deduct entertainment expenses, but only when entertaining a client, customer or employee, while also meeting particular IRS rules. Some deductions may only cover a percentage of your expenses, like the aforementioned dinner with clients (usually 50 percent) or the home-office deduction, which is based on the square footage of your office. When documenting, go beyond collecting receipts. If you hire your teenager as an employee, document his or her duties and hours. On parking and toll receipts, write your destination and business reason for the road trip.
You should track every business expense and comb over them with your CPA at the end of the year to ensure you only take legitimate deductions, both to minimize your risk of audit and to have the documentation in place in case the IRS ever comes knocking.
Possible Deductions for Taxes
Accounting fees
Advertising
Amortization
Auto expenses
Bad debts that you cannot collect
Banking fees
Board meetings
Building repairs and maintenance
Business association membership dues
Business travel
Cafeteria health-insurance plan (requires plan)
Charitable deductions made for a business purpose
Cleaning/janitorial services
Collection Expenses
Commissions to outside parties
Computers and tech supplies
Consulting fees
Continuing education for yourself to maintain licensing and improve skillsl
Conventions and trade shows
Costs of goods sold
Credit card convenience fees
Depreciation
Dining during business travel
Discounts to customers
Education and training for employees (new)
Employee wages
Entertainment for customers and clients
Equipment
Equipment repairs
Exhibits for publicity
Family members' wages
Franchise fees (new)
Freight or shipping costs
Furniture or fixtures
Gifts for customers ($25 deduction limit for each)
Group insurance (if qualifying)
Health insurance
Home office
Interest
Internet hosting and services
Investment advice and fees
Legal fees
License fees
Losses due to theft
Management fees
Materials
Maintenance
Medical expenses (with plan)
Mortgage interest on business property
Moving
Newspapers and magazines
Office supplies and expenses
Outside services
Payroll taxes for employees, including Social Security, Medicare taxes and unemployment taxes
Parking and tolls
Pension plans
Postage
Publicity
Prizes for contests
Real estate-related expenses
Rebates on sales
Rent
Research and development
Retirement plans
Royalties
Safe-deposit box
Safe
Software and online services
Storage rental
Subcontractors
Taxes
Telephone
Utilities
Website design
Workers' compensation insurance
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Comments:
I am a CPA and have found that the package tax software does not get you all the deductions. If you have a small business, please get some professional tax help. I have helped at least 2 clients (trying to do their own taxes online) a savings at least $5000 each-a lot less than my fees.
Thank-you for the valuable insight, this is so helpful, you always here about people claiming tax deductions but knowing what's a viable claim offers the confidence to persue.
It doesn't mention how to get these deductions however. Just knowing there are lots of tax deductions available won't do any good if you don't know how. Start with your filing status and what types of forms to use.
Now I can be part of the 1%!!! Thanks.....
Thankyou, great info. I just started my small business 3 months ago and this is very helpful!
This article just got me a 3k higher refund check by using actual expense deductions for my truck and the 200% depreciation for a truck I purchased last year. I can not think of a better argument for a flat tax.
Thanks for the article, Mark. I'll also add a little "commercial" for CPA's: If you're a small business owner, you need one! When I first started out in my own business, I was a little surprised at how much it was going to cost me to have a CPA regularly audit my books and prepare my taxes. I was told at the time by a friend who had his own business that a good CPA would legitimately earn every nickel you paid him by helping you take advantage of every possible deduction at tax time. I have certainly found this to be true and can attest that a good CPA is an incredible asset for you and your business! Lisa www.StartYourOwnSmallBiz.com