Tax breaks and tax write offs can be one of the biggest benefits for anyone who is self-employed or owns a small business. However, with a lengthy list of possibilities, do you know which you can claim, and those you cannot?
Ask any small business owner or person who is self-employed about taxes and they’ll likely give the same response: they either take their taxes to a tax professional, or their eyes gloss over and they may look at you with a blank stare.
The number of credits and deductions that are offered to small business owners or those who are self-employed may feel like an endless list, but here’s a solid base for where to start:
Getting There: Your Vehicle and Mileage
You may be surprised how often these deductions are overlooked:
- Vehicle Mileage – keep a record of the miles you drive for business-related activities and calculate using the Government’s standard rate for your deduction amount. Remember that you can also deduct business-related travel expenses incurred by your spouse who is traveling on your behalf.
- Vehicle Maintenance & Upkeep – your tax write off amount is proportionate to the amount you use your car for business activities. That means if you use your car exclusively for business, you can write off or claim the full cost of maintenance. If you use is 50% of the time, you can claim half of the cost of maintenance.
Where You Work: The Home Office
To claim your home office, it must meet the following conditions:
- Exclusive & Frequent Use – the space must only be used for conducting and operating your business, and must be used frequently. You must perform the most important aspects of your business in the space.
- What doesn’t qualify – home offices that are used for personal use, kitchen tables turned desks, guest rooms with a desk, etc.
To Claim it: Using the simplified method, which allows for $5 per square foot of the space up to 300 square feet, calculate what space in your house is used exclusively for your business and use the formula to calculate the deduction amount. Using the standard method, you’ll need to use Form 8829.
Doing Work: Supplies and Associated Costs
Depending on your trade or professional service you provide, many supplies, materials, and fees related to conducting your business activities are deductible. Common items include:
- Marketing Materials & Costs
- Office Supplies
- Subscription Services related to your business (telephone, internet, etc.)
- Business or Office-related Equipment
There are a few not-so-common costs for business that many people do not claim but could:
- Website Hosting and Domain costs
- Technical or Business-specific Programs or Software
- Business Meals (you can claim up to 50% of your expenses)
- Business Insurance (Homeowner’s or Renter’s can be claimed with your Home Office deduction)
- Costs for Professional Education or Trade Associations related to your business
Advice for Filing
Keeping up with the receipts and your books may be difficult without some help – which is why we suggest using a bookkeeping software to keep things organized and make tax time a lot easier. But when it comes to filing your taxes, we always suggest using a tax professional to prepare your return. They can assist you with what you can claim as well tax breaks and write offs you may be missing.
We understand you have a lot to worry about as a small business owner or are self-employed. So we’re here to help. The Liberty Accounting blog features articles and insight into issues and questions that many small business owners have. You can Like us on Facebook or follow us on Twitter to have news and information placed right in your timeline – or if you like a specific post, share it with your social network using the buttons above or below!