To ensure you get the best tax benefit possible, it’s crucial to make sure you’re tracking all of your expenses and review them with your accountant at year-end to make sure you’re taking advantage of all legitimate tax deductions. Large companies take every conceivable deduction – and you should too. Good record-keeping is crucial in your ability to back up your company with documentation and will allow you to feel more confident, in case the IRS ever comes to check the legitimacy of your expenses.
That’s why it is strongly suggested you partner with someone who understands what needs to be tracked, and why – like 24hr Bookkeeper.
- Medical expenses – To be clear – you are not supposed to write off personal medical bills for the business taxes. But you can deduct medical bills as a personal itemized deduction on Schedule A. After you’ve added up your expenses, you can subtract 10% of your adjusted gross income, and whatever is left, you can deduct. In a few limited cases, the law allows business owners to deduct medical spending from business income.
- Noncash charitable giving – Tax Cuts and Jobs Act of 2017 expanded the pre-tax reform standard deduction. The number is now at a maximum of $12,200 and $24,400 for married couples filing jointly. If you used to itemize your deduction and now take the standard deduction – you no longer receive a specific deduction for charitable giving. Wealthier taxpayers often still opt to take an itemized deduction.
- Business meals – 50% of business meal and beverage costs can be deducted. The meal has to be “ordinary and necessary” and incurred in the course of business – you or an employee has the be the meal, and it “can’t be lavish or extravagant under the circumstances.”
- Education – Education benefits – can be up to $5,250 provided for employees per year. A couple of important notes about this write-off: If you give out education assistance, you need to provide a written ‘Educational Assistance Plan’ that clearly states how the plan works. It can’t favor highly paid employees, and it can’t offer more than 5% to shareholders, owners, or their dependents, the educational benefit has to relate to the employer’s business. Also, you have to give reasonable notice to eligible employees, and their needs to be records of transactions.
- Taxes and Licenses – You cannot deduct personal taxes. According to the IRS – “You can deduct various federal, state, local and foreign taxes directly attributable to your trade or business as a business expense.” Small businesses also have to have a number of business licenses and permits to operate legally and most are tax-deductible expenses.
- Business Use of Your Car & Travel Expenses – Whether you track the exact expenses, or track mileage with a ledger or an app like MileIQ – and take the ‘standard mileage rate’ – you can also deduct tolls and parking fees if that were incurred during the course of business. Meals, lodging, and the business portion of any car rental – during business travel are great deductions as well.
- Business Insurance – According to the IRS, you are allowed to deduct any “ordinary and necessary cost of insurance,” such as commercial property insurance.
- Home Office – You can take a tax deduction of $5 per square foot if your home office is 300 square feet or less, and that part of your home is used for business. This deduction allows up to a maximum of 1,500 for a 300-square-foot space.
- Rent Expenses & Moving Expenses – You know you can write-off your office rent, but any time you move your business to a new location, any costs related to the purchase or renting a new location – included moving and transition costs.
- Salaries and Benefits – Salaries, wages, commissions, and bonuses – if deemed ‘ordinary and reasonable’ in amount, paid for legitimate services provided, and paid for or incurred in the current year. Health plans, Life insurance coverage, dependent care assistance, cafeteria plans, gifts, and education assistance.
- Telephone and Internet Expenses – Phone lines, internet and anything related to conducting the communication side of the business can be deducted. Small business owners can legitimately deduct whatever cell phone usage that is used for business.
- Advertising and Promotion – You can deduct any promotion or marketing expenses that you expect to gain new business from in the future.
- Depreciation – By charting the value decrease over time of tangible or fixed assets a business owns – you decrease the taxable amount of earnings, and can thus reduce the amount of taxes owed.
- Legal and Professional Fees – For example, you can deduct the fees paid to Lawyers, Accountants, Quickbooks and Bookkeepers like 24hr Bookkeeper.
- Retirement Contributions – Your contributions to a traditional IRA or other retirement plan are deductible (up to $6,000 in 2019) – IRA’s allow you to not pay taxes on the investments themselves or their returns until after you retire.
In general – you should be diligent on checking on this handy list of tax write-offs every year at the end of the year so that you don’t waste your money or your company’s money. Smart businesses take every reasonable deduction so that they can reinvest that money back into the success of their organization.
Send us a message, to run your books for you on autopilot, and have confidence in our services – find relief in knowing “it’s taken care of,” and possibly even find money you didn’t know was there!