Whether you’re new to owning your own business or a seasoned vet, taxes can be so stressful. It’s easy to overlook things or simply forget an item here and there.
When you’re gathering all your information come tax time, there are several things you can and should use as write-offs.
Depending on how much money you earned in the last fiscal year, you could be looking at paying the IRS a significant amount of money. These write-offs will help balance that, since it’s money you have invested into your business.
Here are nine things you should remember to use as write-offs during tax season:
1. Home office
It’s important to know that if you’re employed by a company and working from home, you are no longer able to take the home office deduction. However, those who are self-employed and use part of your residence for running the business, you might qualify for a home office deduction.
The IRS requires self-employed workers to use their home regularly and the work space exclusively for business purposes.
It should also be used to hold meetings and/or complete work.
You can deduct membership fees for organizations that include business leagues, chambers of commerce, real estate boards, trade associations, boards of trade, civic organizations and professionals associations. However, it’s worth noting that fees for things like airline, sporting and country clubs are not deductible.
3. Vehicle expenses
In order to use your vehicle as a deduction, you must use it for things like visiting clients, providing transportation for customers and picking up supplies for work.
There are two ways to figure out your deduction:
- The easiest way is to simply keep track of the miles you put on your car for work. The standard mileage rate for 2021 is 56 cents per mils, so you would multiply your total miles by $0.56 and come up with your deduction. For example, if you drove 1,500 miles for work, your deduction would be $840.
- You can also deduct actual car expenses, which might include gas, parking fees, repairs, oil changes and insurance. You would figure out the percentage you used your vehicle for business, then deduct 33% of your car’s expenses. You’ll need to document and have receipts for all the expenses.
4. Phone and internet
In calculating your phone and internet deduction, you’ll have to figure out the percentage you used both for business and personal use. That’s probably easier said than done, but just do the best you can, and hang on to your billing statements to make it easier.
5. Training and education
The cost of any education or training you receive that are directly relevant to your current business can be deducted. Having said that, if it’s training that’s leading up to a new career, that can not be deducted.
6. Credit card interest
If your line of credit helped to finance a purchase for your business (and only your business), the interest you pay on that throughout the year can be deducted. Because of that, it’s smart to have credit cards that are completely devoted to business expenses. This will make it easier to avoid confusing them with personal expenses.
7. Retirement savings
For those who are self-employed and contribute to an individual 401(k), Roth or traditional IRA or a Simplified Employee Pension IRA, some of those contributions, depending on the type of account, can be tax-deductible.
8. Health insurance
This one is a bit nuanced. If a self-employed worker pays for medical, dental or long-term care insurance for yourself or your family, those premiums are tax deductible. The catch is this: If you’re eligible to be covered on your spouse’s insurance plan, you can’t take the deduction.
Whether you’re making business cards, promoting on social media, buying ads on websites or any other form of advertising (big or small), that is a deductible expense.
There are other deductions that can be made, and it’s always smart to consult with a certified public accountant or whomever you have entrusted to file for you.
Other items you might consider deducting include rent, office supplies, business insurance, start-up costs, equipment and meals.