With the downturn in the economy, it's important to save every penny possible. This list of tax write offs should help move you in the right direction.
But before we get to the list of tax write offs, I want to explain about the different types of business taxes of which you need to be aware: business expenses and capital expenses.
Business expenses are the normal, everyday costs that you incur in doing business, and are usually deductible within the year of expenditure.
On the other hand, capital expenses are purchases of assets like office equipment or property, and are usually deductible over time through depreciation, amortization, or depletion.
According to the IRS, in order for a business expense to be deductible it must be deemed ordinary and necessary.
In other words, it must be an expense that is obviously business-related.
As for capital expenses, it can get a little complicated, so it’s a good idea to enlist the aid of your accountant for advice, or go to www.irs.gov and look up the Section 179 tax code.
Generally speaking, capital expenses include items like company cars, furnishings, computer equipment, office machines, etc.
Below is a partial list of tax write offs for general business expenses.
If you'd like to learn more than this list of tax write offs details, click here to go to the small business section of the IRS website for more information on deductible business expenses.
First up on this list of tax write offs is office supplies.
From copy paper to paper clips, office supplies are considered the cost of doing business, and are tax deductible.
If you own a company vehicle that’s used primarily for business, you can deduct it in several ways:
- As a capital expense for the vehicle itself
- Cost of fuel or mileage
- Repairs and upkeep
Automobile deductions can be a bit complicated, but well worth the effort.
My advice is to check with your accountant to see what is and isn’t deductible.
Almost everything you use to promote your business is tax deductible, including print advertising, television advertising, direct mail, business cards, stationery, etc.
Legal and professional fees
Money that you pay for professional services like attorneys, consultants, and accountants are usually deductible the same year as you incur them.
In my opinion, every small business needs an attorney and accountant available for advice and ongoing representation.
If you don't have an attorney or an accountant, ask friends and family for recommendations.
If you're on a budget and need help with simple legal documents like incorporations, LLCs, trademarks, etc., I recommend the following link...Small Business Legal Documents Online!
Reference Materials & Subscriptions
Business books, magazines, and publications are generally fully deductible in the year spent.
You can deduct 50 percent of the tab for entertaining clients or prospective clients if it’s directly related to business, and if business is discussed.
Be sure to write the purpose of the meal and who was there on the bill or receipt.
Lodging, airfare, car rental, mileage, taxis, parking, telephone calls, faxes, dry cleaning…it’s all deductible if you’re traveling for business purposes.
Besides monetary contribution, now is a good time to think about donating old furniture, equipment, or computers to a nonprofit organization or a school.
Depending on your business needs, you can take either deduct these expenses (up to a certain amount) in the first year, or depreciated.
Copiers, computers, fax machines, phone systems, scanners, etc., are all tax-deductible and can be deducted or depreciated.
If you have a dedicated home office or use a portion of your home solely for conducting business, then you can take a home-office deduction.
A percentage of your mortgage, rent, utilities, insurance, etc., can be deducted according to what portion of your home qualifies for your workspace.
Click here to find out more information from the IRS on home-office deductions.
Health Insurance Premiums
If you are self-employed and paying your own health insurance, then your premium costs can be 100 percent deductible.
There are exceptions, so be sure to check with a qualified professional before you deduct them from your taxes.
This gives you an idea of some of the deductions that are available to you as a small business owner.
Before you deduct, however, I strongly urge you to check with your accountant.
To find out even more ways to save, and the rules that go along with them, I encourage you to visit www.irs.gov.