Saturday, January 6, 2018

What Can Your Small Business Deduct

When my husband and I started our trucking business years ago, we were quite a bit younger and didn't really have all of the information I wish we would have when it came to what we could deduct for business expenses. For instance, we didn't realize that we were able to deduct things such as mileage on our personal vehicle when used for business. We started going to HR Block the following year and learned about more business expenses we could deduct and after lots of research, receipts, talking with others who were in business much longer than we were, I compiled a list of what is allowed. (I also learned to keep every receipt just in case you ever run into a situation where you may need to prove your expenses!)

Popular Business Expenses

No matter what type of small business you own, there are a lot of similar business expenses. (Blogging and freelance work fit here too!) If you run to Staples or Office Max for office supplies, keep those receipts! Anything you are buying for your business is, of course, deductible. This includes items such as; paper clips, staples, notebooks, pens, pen holders, envelopes, and printer ink. Be sure to keep track of your mileage on your vehicle too! Be sure to pick up a ledger, some legal pads so you can keep track of dates, beginning and ending miles and destination. This will not only help you during tax season, it also makes this deduction legal and acceptable if the IRS would ever happen to ask for your records. 

If you have employees or if you pay independent contractors you can also deduct their payments. 

If you rent a business property, this is also deductible. However, if you are working from your home, there are some strict guidelines to follow if you would like to deduct a home office deduction.  Most importantly, it is a good idea to document and have evidence, just in case you need it later on. Taking a picture of your home office would suffice if the IRS asked for proof. 

When it comes to a home office, you can not just deduct your kitchen because you sit there and do some work. It must be a space that you use exclusively and regularly for your business. For instance, I have been using my kitchen table as a home office for everything since we are remodeling and my new office isn't done yet. I cannot take this deduction because we also use this space for many other things. You can read more about what forms you need to file appropriately and if you qualify for the home office deduction here

If you are paying insurance for your business, this is also deductible. Health insurance is not allowed. At least not on a Schedule C. We pay for 3 different types of insurance for 3 separate trucks so, we do take this deduction each year. 

Licenses, regulatory fees, registrations, tags, anything that is required for you to run your business is also tax deductible. 

If you pay advertising fees or commissions, these would also be fully deductible. 

We pay a lot out each year for repairs for the trucks. We paid for one motor overhaul for one of our trucks this year which is a ridiculous amount of money! I can choose to either take the full amount from our 2017 taxes or I might depreciate this over a few years. All repairs, maintenance, services, are all fully deductible. 

You may also include legal fees, accounting fees, even half of your business lunch tabs are dedcutible. (Within reason, I'm sure!)

Since we have a small trucking company, we also deduct fuel, tolls, trailer rental, (any equipment rentals needed for your business are tax deductible!) various taxes and fees required such as Heavy Highway Use Tax and IFTA. Rather than deducting entertainment since we really don't have entertainment expenses with clients, truck drivers are allowd to deduct a certain amount and then take a percentage of this amount for each night they are out on the road. (Per diem.) Certain deductions do depend on the type of business you have.

Other forgotten deductions include; interest on loans obtained for your business, business credit card fees, bank fees and ATM fees, accounting fees, money paid to file your taxes, post office fees such as stamps, shipping expenses, and packing material, (only if used for your business of course!), business related travel, cleaning supplies, work boots, uniforms, address labels, cell phones and chargers, laptops, cdesktops, printers, basically anything you buy for your business. Just be sure to keep records, receipts, and document everything. This helps to make tax time a breeze for you!

Not So Legal Deductions 

There are some business expenses that aren't necessarily legal to take. Most are obvious. But, there are a couple that might be a little hard to miss. 

Cell phone bills are tax deductible. But, only the business part. You would actually need to keep a record of business and personal calls. You can deduct things that you use for personal and business but you always have to record accurately. This applies to the personal and business use of a personal vehicle as well. Keep a monthly spreadsheet and notate everything if you want to take these deductions. 

Home phones and WiFi are also necessary for most businesses. But, when you are working from home you are probably going to end up having to split these as well. If any of your Internet services are used for personal use, you need to determine how much. Maybe half and half or maybe 75/25. Home phones/landline phones are not deductible unless you have a second line. Then the second line would be 100% deductible. 

Mileage on a personal vehicle is fine as long as you keep records. You might drive to the airport, a trade show, deliver to customers, or drive to pick up supplies, or when one of your trucks breaks down. Some people think this means they can also deduct the mileage it takes for them to drive to and from their place of business and well, this is actually illegal. 

You may not deduct your previous year's tax bill that you paid into the Federal Government. (Or any other year.) You also may not deduct fines, (including speeding tickets or any other traffic violations.)  penalties, bribes, or money you may have paid a hitman or any other illegal activity. 

As much as you may wish you could deduct outrageously expensive gifts for business gifts. It was very gracious of you to give your employees and business associates those $7000 watches for Christmas but, you're not really allowed to deduct anything more than $25 per gift. 

If you end up receiving a letter from the IRS, you may want to contact an attorney. Not that it has to be scary. You never know! They could end up owing you money. (Wouldn't that be nice for once!) Really, having an attorney on hand that you can call for advice such as tax advice, investments, and contracts is a very wise idea. You want to be sure you're protected and have someone you can trust, like personal injury attorney Tampa, when it comes to owning a business and protecting your family. Even from things that you may not plan for like accidents and injuries.

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