Business Related Deductions
By Erica M. Kachlic, Owner, EMK Tax And Accounting LLC
As a tax professional, one of the most asked questions I receive from independent contractors and small business owners is “What can I write off???” The simple answer is “Was it related to conducting business?” If it is, then it is likely deductible. But let’s take a closer look at some of those items that leave people a little unsure.
Auto Expenses: YES. You can write off the business use of your vehicle. You can claim the business mileage or the actual expenses (gas, maintenance, insurance, depreciation, etc), but not both. Be sure you keep detailed logs of miles driven for business. You can pick up a mileage log at your local office supply store or you can use something like a regular notebook or an Excel spreadsheet. Be sure to notate the date, destination, beginning and ending odometer reading, and the total business mileage.
Computer, Phone & Internet Expenses: When you buy a computer that you use for business, you can depreciate the cost over a period of 5 years (in some cases, you can elect to expense the entire amount the first year it is placed in service). The same is true with telephones, however, you depreciate them over a longer period. Both internet and telephone service can be deducted based on their business usage.
Home Office: This is an area that is a little trickier and is often looked at a little more closely in an audit. You are able to deduct a portion of your home that is used for business purposes. If you own your home, you can depreciate the business portion of the home and a portion of the mortgage interest. If you rent, you take a portion of the rent you pay each month. Be sure to bring those amounts along with the totals for your utilities and other home related expenses. You will also need the total square footage of your home as well as the square footage of the area you use for business.
Interest: If you borrow money to fund your business, the interest you pay is a deductible expense. The same is true for credit card interest that was incurred in buying items for your business.
Meals & Entertainment: Meals & entertainment can be deducted if business was conducted. To back up your deduction, make sure to document who was in attendance and what was discussed/purpose of the meeting. The expectation is that future business between the parties will occur as a result.
Ordinary & Necessary Expenses: Every business has some kind of “normal” business expenses. We all need pens and paper. Maybe even some postage or business cards. The point is, if it is necessary or helpful to conduct business, it can generally be deducted. Be sure to keep receipts, bank or credit card statements to document these purchases.
Travel: If you have to leave home to conduct business in another location. To qualify, be sure to keep documentation of the travel dates and business purpose. You may be allowed to deduct airfare, lodging, ground transportation, meals and other related expenses you incur while away from home.
This list is by no means complete and you should definitely consult a tax pro if you are unsure about a specific deduction or need further information. Feel free to find me on Facebook athttps://www.facebook.com/EMKTaxAndAccounting/ I am happy to answer questions or take on new clients if you are looking for someone to help you with your tax and accounting needs.
Best of luck to you in business, I wish you many prosperous years!
Photo: The Trendy Sparrow