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10 TAX WRITE-OFFS EVERY
ENTREPRENEUR NEEDS TO KNOW
I love this time of year. We become re-energized and excited for new beginnings—newer, bigger goals on the horizon. Things are off to a great start, then halfway through January, we are obnoxiously reminded what lurks around the corner…TAX SEASON. I might be a tad dramatic, but the obnoxious part is true. It’s time to prepare and I am going to give you 10 tax write-offs every entrepreneur should know.
Being self-employed means write-offs for our business that help lower our tax bill. Every business is different and what you can write off varies based on your business. I leave my taxes to the professionals; I have an expert handle mine. Even if you like to work out your taxes on your own, I think it’s important to educate yourself and consult a tax professional before doing so.
CELL PHONE
Gone are the days of spending $30 on a cell phone bill. In addition to phone service, when adding data plans, your phone bill can really skyrocket. We use our phones for emails, scheduling clients, social media, booking travel, financials and more.
Everything we do with our phones makes them eligible as a write-off! If you use your cell phone solely for your business, you can write off 100% of your bill. However, if you use it for personal use as well, you’ll need to track how much of each and come up with an estimated percentage.
EDUCATION
I don’t know about you, but I am addicted to learning new things and taking courses that will improve my business. The good news is all this education is a write-off! Education can be defined as online courses or workshops, in-person training, books, ebooks, audiobooks or courses, and reference materials like magazines, journals, or newspapers. Just remember, the course must be relevant to your business.
HOME OFFICE
There are many perks to working from home and a tax write-off is one of them! The IRS rule around a home office is defined as an exclusive and regular place where you do your business. That means it cannot be somewhere in your home that is also used for personal use. If you are like me and like to lay in bed on your laptop (or sit on the couch or at the kitchen table), sorry, but you can’t write-off your entire mortgage. You must have a room dedicated solely to your business.
If you meet the IRS requirements of a home office, you are allowed to write off a percentage of your mortgage or rent. Consult with an experienced CPA to determine the percentage. In addition, you also can write-off 100% of the repairs, furniture, and decor that go in the designated room.
Utilities
In addition to your home office, you can also write off a percentage of your utilities. This includes the internet, electricity, water, and gas. Consult with a CPA to help you figure out the most accurate calculation.
Travel
Most of us are aware that you can write off out-of-town business trips. However, you also have the ability to write-off your local travel expenses. This can include mileage for local networking events, client meetings, and any functions you attend promoting your business. If you use an Uber or taxi to get to a local event, track that as well. The travel must be business-related. There are several apps available to track your business mileage. If you don’t do this already—start! Become more mindful of local business travel. The mileage can really add up.
GIFTS
This might be one of my favorite write-offs because I love to do nice things for my clients. You can write off gifts related to your business. This can include thank you gifts for referrals, client appreciation gifts, client or colleague gifts for a special occasion, or thank you gifts for subcontractors.
Keep in mind, the IRS guideline for gift write-offs is that you are only allowed to write-off $25 per person per year. If you spend $100, only $25 would be approved by the IRS. But you can buy some pretty awesome gifts for $25.
SOFTWARE/APPS
There are so many amazing software programs out there that I currently use to run and automate my business. The good news is they are write-offs! Obviously, they have to be related to your business. So if you are a gamer, your latest X-Box game doesn’t count.
If you currently use apps on your phone like Dropbox, Tailwind, Accuity or any other app used to help run your business, add those expenses to a list of write-offs.
FEES
In addition to writing off bank fees, you can also write off merchant processing or processing fees. Processors like Stripe, Square, or PayPal all charge a percentage of your sales; these amounts can be written off.
A common mistake for online business owners is that instead of taking the small fee as an expense, they log their net sale (the amount they receive after the fee) as their gross income.
Subcontractors
Many business owners hire contractors to help with various tasks. This can include graphic designers, photographers, web development, bookkeeping, copywriting, social media management or a virtual assistant. Everything you pay for these contracts is deductible.
If you pay more than $600 you are required to file a 1099. If this is the case, you can get them a W-9 online from the IRS.
MEALS
If you take a client, colleague, or subcontractor out to eat and discuss business during the meal, that is considered a business expense. You are able to deduct 50% of the bill, which is considered the other person’s portion.
There are a ton of available business-related expenses you can deduct each year. Educate yourself on all the possibilities. Track and utilize the 10 tax write-offs every entrepreneur should know. Keep your expenses separate from your personal and it will help you stay organized.
