First, let’s get one thing straight—you are not the IRS, nor are you going to file an official tax return on your own. But that doesn’t mean you don’t have to keep track of your business expenses! When it comes time to pay taxes at the end of the year, you might be eligible to write off certain items you purchased throughout the year, depending on what type of business structure you operate under and where you live in the world.
Common Tax Deductions
Many business expenses are tax deductible, which can save you a lot of money come tax time. It is necessary and ordinary for a business expense to be deducted. In your industry, ordinary expenses are accepted and common. An expense that is necessary for your business is one that is helpful and appropriate.
Some common business deductions include car and truck expenses (minus the standard mileage rate), advertising costs, and legal fees related to running the business.
office supplies (pens, paper clips), depreciation on equipment used for the business-owning individual’s trade or profession, certain losses from renting out property used in the trade or profession (except if you’re a real estate professional), home office deduction related to running the trade or profession from home (with strict guidelines)
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Typical Workplace and Traveling Expenses
Many people are surprised to learn that there are a number of expenses that can be written off as business expenses. These include workplace expenses, such as office rent and utilities, and travel expenses, such as airfare and hotel stays.
By keeping track of these expenses and writing them off on your taxes, you can save yourself a significant amount of money.
For example, if you work out of an office one day per week, that means 50% of the space is tax deductible. Furthermore, if you don’t have any other deductions for the year (such as mortgage interest or charity), then 50% of your work-related travel is also tax deductible.
Medical and Health Care Costs
You can deduct medical and health care costs for yourself, your spouse, and your dependents. This includes dental care, eyeglasses, contact lenses, and other necessary health services and supplies. Medical appointments can also be deducted.
To claim these deductions, you’ll need receipts or other documentation. You should keep records of all eligible expenses during the year in case they’re questioned by the IRS. Keep a copy of your tax return, and file it with your W-2s and 1099s as proof that you paid taxes on these expenses throughout the year.
Job Search Expenses
You can deduct many of the expenses you incur while looking for a job in your current field. These job search expenses can include the cost of travel, resume writing services, and other professional services related to your job search.
You can deduct these expenses even if you don’t get a job as a result of your efforts. The expense must be both ordinary and necessary for your employment pursuit. The IRS will consider the following factors when determining whether an expense is considered necessary:
- The amount of time you spend on the activity versus your total work time
- The extent to which it prevents you from earning income or furthering another interest or hobby
- Your motives – are they personal or are they solely business?
Computer Equipment, Software, and Subscriptions Section: Car Maintenance, Repairs, and Depreciation Section: Home Office Deduction Section: Cell Phone Expense Section: Auto Mileage Logs
The first step is to keep track of all your business expenses throughout the year. This includes everything from computer equipment and software to car maintenance and repairs. You can then deduct these expenses come tax time. The second step is to determine which expenses are deductible.
For example, you can write off the cost of your computer equipment and software if you use it exclusively for business purposes. You can also deduct a portion of your car maintenance and repair costs if you use your car for business purposes.
The third step is to keep track of your mileage. If you use your car for business purposes, you can deduct a portion of the cost of gas and oil as well as depreciation on your vehicle.
The fourth step is to claim your deductions on your taxes.
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