10 things a small business can write off
We all have one fear in common – everyone is a little afraid of the IRS. While a little fear is healthy for the small business owner or self-employed individual, too much fear of the IRS can be bad for the bottom line.
If you want to pay less income tax, take the time to learn what others in your industry withhold and track every legitimate business expense. The savings can easily be several hundred dollars. Start with these ten categories.
Home office expenses: If you operate your business from your home, some of your home insurance, rent, repairs, maintenance, utilities and other expenses may be deductible.
Business Mileage: If you track every business mile driven, you’ll pay less tax. But if those miles aren’t tracked properly, they can be disallowed.
Interest on business debt: Monthly checking account fees, bank overdraft penalties, business credit card finance charges, interest on a home loan taken out to finance your business, and annual credit card fees are all deductible.
Health insurance for self-employment: Self-employed health insurance costs are a business deduction and are taken out on your personal tax return.
IRAs and Retirement Deposits: Self-employment and small business retirement accounts and IRA deposits are also reported on your 1040 personal tax return.
Promotional expenses: If you spent money or exchanged goods to get your business’s name or product out to the public, that expense is deductible as a promotional expense.
Seminars and lessons: Any classes that make you better at what you do to generate income, as well as general business classes, are deductible. Don’t forget to record all kilometers traveled and travel expenses if you have any; they are also deductible.
Subscriptions: Any magazines, newspapers and newsletters you buy to improve your business knowledge, including online subscriptions, can be deducted on your business tax return.
Rent: If you pay rent for an office, desk space, chair space, or storage space, rent tools or equipment, pay for a loft, or have other rental expenses in your business, these expenses are deductible.
Stock: Inventory costs are only deducted when the inventory is sold; unlike most other business expenses, they are not always deductible in the same year the money is spent. The IRS has specific rules for inventory management.
A tax preparer can only work on the information you provide, and unless you understand what you can and cannot deduct on a business return, even a good tax preparer will miss valuable deductions. Keeping good records, documenting all business expenses is all you need if an audit occurs.
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