Let’s just skip the witty intro and get right down to business, shall we?
Let’s just start with the thing we all use, cars. You can deduct tolls, parking fees, and mileage for business use of your car. You may be like the average person, and take the standard mileage rate deduction because, honestly most people find record keeping of mileage to be an extremely tedious and boring task. But, should you actually keep records, you’ll find your deduction to be a fair deal higher. Make a record of your mileage, odometer start and finish for each business trip, destination, starting point and the purpose of the business trip, to ascertain it’s actually for business (and not time for happy hour).
If you happen to do some work from home and use your home or personal cell phone for a dedicated business service, you may deduct the portion only used for business purposes, but that’s still something.
Gift and Entertainment
Client gifts can be deducted, but only up to $25 per gift, so there won’t be any car-buying for your clients. Entertainment and travel expenses are probably one of the most well-known things that are deductible; however - you should keep near-perfect records here, and keep a log of all the W’s. Who you met, why, where, when, and for what business purpose. Just like English class.
Interest on Loans
You may also fully deduct the interest on loans for your business. Even if you have a loan from a relative, just make sure it doesn’t break any IRS rules. Can’t be a rule-breaker.. No rebels here.
Even charity is no exception. Just make sure you’ve got all your receipts, and don’t forget to keep good track of your inventory, especially if you donated goods, not cash. Even rent is deductible.
It’s a bit late to be discussing this, but I’ll go ahead and say it. Don’t go putting family dinners into your planner and think you will deduct them later. The IRS requires two things to both be correct in order to deduct an expense. An expense must be ordinary and necessary. Ordinary means it’s common and accepted in the industry you’re in. Necessary means it’s helpful and appropriate for your business. No deducting that killer sound system when you work with accounting. We’ve covered a fair deal of expenses, so let’s cover some things that are not deductible, ever.
What’s Not Deductible
I previously said entertainment was deductible, and that’s true, but the membership fee isn’t. Even if you have to be a member strictly because of business, and only go for business, it’s still not deductible. Lobbying expenses, Federal income tax payments, and political contributions are also not deductible expenses. Neither are the penalties and fines you pay when you break the law. I hope you too can learn to really maximize on your tax deductions for business expenses. For further information, check out Edmonton’s Benefit Strategies Inc. and their Employee Benefit Edmonton, this one in particular.