2019 is almost over and with the start of a new year means one thing—tax season is almost here. If you’re like most Americans and dread doing your tax returns, try to remain positive and use these tips to help take advantage of all the tax benefits available. At Bookkeeping Geeks, we’ve compiled a list of 10 purchases you may not know are tax-deductible that may help you lower your tax bill or increase your tax return.
Around Your Office…
These business expenses (and more) are tax-deductible.
You are able to deduct 50% of meal and beverage costs as a business expense if the meals are considered “ordinary and necessary” and incurred in the course of business.
There is no dollar limit or concrete guidelines, but meals are not to be lavish or extravagant. Meals that are furnished to current or potential customers, consultants, or clients/contacts as well as current employees qualify.
Make sure you keep records of all your receipts. There are two ways to make this deduction: the actual costs for meals or the standard IRS meal allowance.
Small businesses are required by law to have insurance. These insurances can vary from state to state but the three essential insurances for any small business with employees are:
- Unemployment insurance
- Disability insurance
- Workers’ compensation
You are able to deduct the premiums you pay for these business insurances, as well as others not listed here, on your business taxes.
Legal and Professional Fees
Legal and professional fees that are needed and related to running your small business are tax deductible. These may include fees charged by lawyers, CPAs, bookkeepers, and tax preparers.
That’s right, hiring a professional to manage your bookkeeping is 100% tax-deductible. Contact Bookkeeping Geeks today to speak with Dorothy Harvey!
Marketing & Advertising
Promoting and advertising your business is 100% deductible. Examples include:
- purchasing ad space online or in print
- printing business cards or brochures
- hiring someone to design a business logo
- website creation
- promotional materials
Many clients ask ‘Can I write off my car?’ and the answer is Yes. If you use your car solely for business, you can write off the entire cost of operating the car. If you use your car for both business and personal, you can write off the costs associated only with the business use.
There are two methods for deducting car expenses and you can choose whichever one gives you the greatest tax benefit.
- Standard mileage rate The standard mileage deduction is $0.58 a mile for 2019. Multiply the business related miles driven times the standard mileage rate to determine your deduction.
- Actual expense method This method involves tracking all the operating costs of your car and multiplying those expenses by the percentage of business miles driven. These costs include: gas, oil, repairs, insurance, registration fees, and lease payments.
Both of these methods require you to keep a detailed log of your business miles. Note that you cannot include miles driven commuting between your home and business—this is considered personal commuting expenses.
The cost of renting a space is fully deductible. The space can be any type of facility such as an office, factory, boutique, or storefront. Rental equipment is also fully deductible. Rent paid on your home is not deductible and is considered a home office expense.
Working from Home?
You can deduct a portion of your home office expenses if you use your home for your office or business. You must regularly and exclusively use your home as the principle place of business.
This deduction includes direct costs (upkeep such as painting a home office) and indirect (ex. the percent of rent or mortgage interest). Similar to the business–related car deduction, you can use a simplified method or a standard method of deduction.
- Measurement method This method allows you to deduct $5 per square foot of your home that is used for business purposes up to 300 square feet
- Standard method This method tracks all the expenses of maintaining your home (mortgage interest or rent, utilities, taxes, housekeeping/landscaping, repairs, etc.) and multiplying these expenses by the % of your home you use for business.
The IRS has allowed work-related education expenses to qualify for tax deductions. Education expenses are legitimate businesses expenses and are fully deductible when they directly add value to your business and increase the company’s overall expertise. Examples of tax-deductible education expenses include:
- Seminars, webinars, classes, and workshops
- Books and professional publications
- Transportation expenses to and from trainings
Education expenses that are outside the realm of your business or costs that would qualify you or your employees for a new career do not qualify for a tax deduction.
Use of the telephone and Internet can be integral to your business and are deductible expenses. If you use your cell phone or Internet for both personal and business reasons, you can only deduct the percentage allocable to business purposes. You may need to keep an itemized bill and records to prove the amount of business use.
Personal Tax Deductions for Entrepreneurs
I’ve covered some deductions that can be claimed on a Schedule C or Form 1065. There are several additional tax breaks small business owners claim on their individual tax returns.
Medical and Dental Bills
Medical and dental bills can add up quickly. While this may not seem like the most exciting purchase(s), it can definitely add up. If your medical and/or dental records exceed 10% of your adjusted gross income (AGI) you qualify for a tax-deduction.
Expenses can include:
- hospital or nursing care
- prescription medication
- hearings aids, wheelchairs, contacts, prescription eyeglasses
- transportation to medical care
It is important to keep track of all your bills, receipts, and records to prove your purchases.
Health Insurance Premiums
Piggybacking off medical and dental bills, if you are responsible for the purchase of your own health insurance coverage you qualify for a tax deduction. If you own your own business and buy your own health insurance, the cost of your health insurance premium is likely deductible. This is not an itemized deduction, but rather gets taken off your adjusted gross income (AGI).
Nothing says the holidays more than helping out other people. Whether you donate monetarily or through new or used property and purchases (such as clothes, toys, cars, etc.) you can qualify for the charitable donations deduction. You must itemize your donations to receive this deduction and you must donate to a qualifying tax-exempt organization.
Child and Dependent Care Expenses
If you have to pay someone to care for your child or dependent while you work, you can claim the Child and Dependent Care Credit. This credit focuses on childcare for a child under 13 years of age (an incapacitated spouse or parent also qualify).
You can deduct up to 35% of expenses up to $3,000 or up to $6,000 for two or more children.
Read More > Planning to Save Business Income Taxes in 2020
Make the Most Out of Your Tax Return
At Bookkeeping Geeks, our specialty is helping businesses save time and money with bookkeeping services. Tax deductions and credits require a lot of good record keeping. Call us today at 813-515-0216 to see how we can help you qualify for the most tax deductions and credits and put more money back in your pocket!