That’s right – tax season has arrived, and we understand it’s hard being a small business owner this time of year. You don’t want to leave money on the table or open yourself up to an IRS audit. If you’re self-employed, you’re in luck! We put together this list to help minimize your tax woes. Keep in mind that these common deductions may not be applicable to every business. Consult with your tax advisor or CPA before claiming a deduction on your tax return.
The new tax law
Good news! Here are a few benefits from changes to the tax laws. One is a reduction in the corporate tax rate from 35 percent to 21 percent. The other significant change is a 20 percent deduction for “pass-through” businesses, which make up 95 percent of U.S. small businesses. There’s just one caveat: married individuals with service-based businesses must make below $315,000 to claim the deduction or below $157,500 if single.
Do you run a business from the comfort of your home? If so, you can claim it as an expense! How many of the following statements about your home office apply to you?
[ ] I have a home office that I use exclusively for my business.
[ ] I regularly use my home office for my business.
[ ] My home office is the principal place, where I conduct my business’s most important activities.
Did you check all three? Great! Make sure you also submit the following with your return:
- Photographic evidence that shows your home office has clear and identifiable boundaries that draw a distinction between your “home” and your “office.”
- IRS Form 8829, “Expenses for Business Use of Your Home”
Business Use of Your Vehicle
Do you use a car or truck for your day-to-day business travel? Check the following statements that best fit how you’ve used your vehicle for your business over the past year.
[ ] I use my vehicle exclusively for my business. *If you use your car or truck exclusively for your business you may be able to deduct all of its operating costs.
[ ] I use my vehicle partly for my business. *You may be able to deduct the cost of the mileage you rack up for business related activities. See here for more details.
[ ] I bought a new or used vehicle within the last year for my business. *Your deduction will vary depending on the type of vehicle you purchased.
You will need to know how many miles were driven for business for the standard deduction. If you have had major car repairs, it may be beneficial to deduct the actual expenses. In that case, add up all the car expenses that include fuel, repair, insurance and registration.
Business-Related Professional Fees
When self-employed, you’re in charge of your own business. But at one point or another, you’ve probably explored outside help for legal or accounting expertise. You may be eligible to deduct those fees. Check the following statements that best apply to you and your business to see if you qualify:
[ ] I paid a professional to help me with bookkeeping and accounting for my business within the last year.
[ ] I paid a fee to a legal professional. You can only take a business deduction in this situation for the part of the fee that pertains to your business.
[ ] I paid a fee to a professional to help prepare my tax return. You can only deduct the cost of preparing the portion of your tax return relating to your business on the business portion of your tax return. But you can also deduct the portion related to your personal tax return preparation if you itemize it on the Schedule A.
Even if you conduct most of your business activities from a home office, you may still be able to claim some travel expenses on your Schedule C if the traveling you do for business meets the following conditions:
- The travel must be necessary.
- The travel must take you outside the city or area in which you conduct business.
- The travel must be ordinary. Sorry, that helicopter ride or private jet ride may not qualify.
If your business travel satisfies these requirements, here are a few business-related travel expenses you may be able to claim:
- Travel to and from your destination (via car, bus, plane, train).
- Parking fees and tolls.
- Business-related baggage or shipping fees.
- Meals and lodging.
Submit documentation of each expense, return and departure dates, reason for the trip and mileage logs.
Business owners learn through experience, but they can also benefit from resources that help them learn new skills and gain wisdom from successful entrepreneurs. Education, like the courses we offer at BusinessBlocks, is another area that is fully deductible if it contributes to your business.
Here are some examples of education expenses you may be eligible to claim. See how many you qualify for:
[ ] In-person seminars or online webinars
[ ] Subscriptions to trade or industry journals or publications
[ ] Industry-specific books
[ ] Workshops or courses that build or extend your business skill set
[ ] Transportation expenses incurred when attending classes
[ ] One-on-one professional training sessions
[ ] Textbooks