Sure, it’s only January. But April 15 will be here before you know it! And with plenty of time before filing day, now is the perfect time to start looking for those deductions and credits. Nolo.com provides great tips and often overlooked expenses that you can use to ease the pain of filing business taxes.
1. Business Start-up Costs – Before your doors even open, you incur several costs just getting your business off the ground. You can deduct $5,000 of these capital expenses the first year of your business. Remember that all the daily expenses of advertising, utilities and supplies can also be deducted – but only AFTER your business doors are open.
2. Auto Expenses – We probably all use our vehicle for work. So always keep track of your car expenses! There are two ways to deduct auto costs. The actual expense method requires you to track and deduct all your business expenses. The standard mileage rate method means you add up all your work-related miles travelled and multiply it by the IRS’ standard mileage rate.
Not sure which options is best for you? If your car is used for both business and personal, you can only deduct the business portion. In this case, tracking the mileage may be your best bet. However if you have a newer car, the actual expenses method may provide an overall larger deduction. Plus with this method, you can deduct the vehicle depreciation amount.
3. Books and Professional Fees – Do you subscribe to industry magazines for your business? What about business books you’ve purchased? These are both fully deductible as a cost of doing business. And all those fees you paid your lawyer, CPA or consultant? Yep, those are tax deductible as well.
4. Bad Debts – This one may not apply to everyone. But it’s worth considering, especially if you’ve had a client or customer who skipped out on paying you. If your business sells actual goods, and a customer took your products and stiffed you the payment, then you can tax deduct the cost of those goods. Unfortunately the same cannot be said for services that were not paid.
5. Interest – Did you know you can deduct interest on business purchases? If you use credit or a personal loan to pay for business expenses, the interest incurred is fully tax deductible.
Being a business owner or entrepreneur can be tough at tax time. But if you keep track of your expenses and deduct the items you are entitled to, you are likely in much better shape than you expect. Don’t let April 15 come without being prepared!