We all share a common fear – everyone’s just a little scared of the IRS. Although a little fear is healthy, too much fear of the IRS for the small business owner or self-employed person 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 are deducting and track any legitimate business expenses. The savings could easily amount to hundreds of dollars. Start with these ten categories.
Expenses for the home office: If you run your business from home, some of your home insurance, rent, repairs, maintenance, utilities, and other expenses could be deductible.
Business kilometers: When you track every business mile driven, you pay less in taxes. However, if these miles are not properly recorded, they cannot be accepted.
Interest on business debts: Monthly business checking account fees, bank overdraft penalties, business credit card financing fees, interest on a home loan taken out to fund your business, and annual credit card fees are all deductible.
Health insurance for the self-employed: Self-employed health insurance expenses are a business deduction and will be deducted on your personal tax return.
IRA and Retirement Savings: Self-employed and small business retirement accounts and IRA deposits are also reported on your personal 1040 tax return.
Ad spend: If you spent money or traded goods to get your company name or product out there, these costs are deductible as advertising expenses.
Seminars and courses: Any classes that improve you in what you do to earn income and general business classes are all deductible. Remember to record all mileage and travel expenses, if any; they are also deductible.
Subscriptions: Any magazines, newspapers and newsletters that you buy to increase your business knowledge, including online subscriptions, are deductible on your business tax return.
Rent: If you pay rent for an office, workspace, chair space, storage space, rent tools or equipment, pay for an attic, or have other rental expenses in your business, those expenses are deductible.
inventory: storage costs are only deductible when stocks are sold; Unlike most other business expenses, they are not always deducted in the same year the money is spent. The IRS has specific rules for inventory management.
A tax professional can only work on the information you provide, and if you don’t understand what you can and cannot deduct on a company return, even a good tax professional will miss out on valuable deductions. Keeping good records and documenting all business expenses is all you need should an audit come up.