Clueless about which expenses you can write off when you have your own business? We’ll help you prepare for the dreaded tax season.
Seinfeld and Kramer were clueless when it came to tax write-offs. Go on, take a quick break and see what I’m talking about. Get in your laugh (good one, huh?)—then let’s hit the ground running.
Yes, folks, it’s that time again: the brain-numbing tax season. Promise yourself a fun night out with friends once it’s all submitted to the IRS. But until that day arrives, pace yourself, and let the good times—and write-offs—roll.
There really are some great business write-offs you should not miss if you work for yourself:
Credit Card Interest
If you’re carrying any debt on credit cards for purchases made for your business, you can write off that interest. The same is true for any personal loan you may have taken to pay bills for your business. Be sure that all bank records would confirm that these were business expenses, but do know that all of this interest is, in fact, deductible.
Perhaps the easiest method is to keep track of miles and then use the 2012 rate of 55.5 cents per mile driven for business purposes.
The other method is more complex, but it can buy you a bit more in deductions. This method is called the Actual Expense Method. It’s more time-consuming to track, especially if you use one vehicle for both business and personal use, but using this method allows you to write off all business-related expenses, including depreciation. There are lots of vehicle tax credits, so it’s wise to talk to your accountant about this in greater detail.
Knowledge and Advice
That’s right. You can write off your accountant and other professional fees, such as legal fees and even stops at Barnes & Noble to pick up the books you need to make sense out of all of the advice you’re receiving.
It’s important to note that these fees must be tied to the present year’s business. If the advice you’re attaining is about business growth and strategy for future years, it gets questionable, and you can file that a little differently. Ask your accountant—then write off that advice.
Additionally, any other books you purchase for professional development and understanding how to run your business better—those are write-offs, too. Just be sure, as always, to keep track of receipts, bills, etc.
Eating, Drinking and Being Merry
Well, be careful here. The rule is that 50 percent of the expenses incurred from entertaining business contacts may be considered a write-off. A quick read of some headlines ought to keep you in check.
Don’t color outside the lines on this one. Keep the entertaining write-offs truly related to business meetings and/or entertaining directly before or after a business event.
Throughout the year, keep track of seminars, consultations, training meetings, memberships to any associations, etc., that will help you to run your business. And then write ‘em off.
Have you purchased anything special to keep you safe on the job? Hard hats, eye or ear protection, protective clothing or gloves? More fodder for the write-off stack.
Lean in for this one! If you’re self-employed, you get to write off 100 percent of your medical insurance and lots of other medical expenses, including medications. This could be a massive savings for some of you. The costs these days associated with health and healing are simply stunning; taking advantage of this tax break could truly help to offset those exorbitant bills.
Not too many people miss this one, but there are a few travel-related write-offs that many fail to consider. The emergency dry cleaning you had to do because you spilled sauce at dinner one night? Add it to the list.
One of my personal favorites is to schedule out-of-town meetings on Fridays and Mondays. If you have to stay the weekend, then it’s a write-off! So go on—sandwich those meetings with some fun. (Maybe it’ll even take the sting out of all of these taxes that you’re paying.)
If all of this is news to you, don’t feel too bad. Seinfeld and Kramer needed a little clarification on these issues, too. Good luck!
Valerie Wilson is a freelance writer who enjoys writing about ways to save money in every way possible. When her piggy banks gets full, she travels as much as she can.