Wondering how you can keep more of your income by maximizing the number of deductions you take? Here are five business write-offs you might be missing.
Business write-offs are a key way to save money. While most businesses routinely take their deductions for medical expenses, utilities, retirement plans and conventions, for example, there are quite a few commonly missed expenses as well. Today we’ll take a look at some of the most frequently overlooked business write-offs, so you can start maximizing the income you keep.
Internet Business Write-Offs
A lot of people assume that since they’re only on the Internet part of the time for business and the rest for personal reasons, they can’t write it off at all. But if you have an online business, you telecommute part or full time, or you couldn’t do your job without the Internet (which is most people these days), you can write off the associated costs. According to the IRS, you should only write off the percentage of costs correlating to the proportion of the time you use it for business.
Depreciation Business Write-Offs
You can depreciate any asset you buy for your business. While many people assume you have to limit your write-offs to large expenses, such as vehicles or heavy machinery, you can also depreciate many smaller expenses. For instance, you can depreciate the following over time:
- Office supplies
- IT equipment
- Furniture
- Printers and copiers
- … and so on
Office and Home Business Write-Offs
Many small business owners forget to write off the space they use at home for company-related activities. The easiest way to take this deduction is to use a simplified method based on square footage. If the total amount of business-related space is 10 percent, for example, then you can write off 10 percent of your mortgage, property taxes, utilities and any other home-related expenses. Since self-employment taxes are higher than other types of income tax, you want to divert as many of your deductions toward your business as possible, so as to offset as much of those taxes as you can.
Travel Per Diem Business Write-Offs
Per diems are specified amounts corresponding to travel away from home on business, especially overnight. Each city has its own per diem rate, which changes each year. If you spend the night in Seattle on business, you get a certain amount of deductible cost – say, $74. That means that even if you only spend $40 on food, you can still take the whole deduction of $74. So if you want, you don’t have to track your expenses, and can instead multiply the number of days you were in that city and deduct 50 percent of the total cost. If you paid more than the per diem, you might want to keep track of your expenses and deduct 50 percent of that cost instead.
Mileage Business Write-Offs
Automobile miles for business are great write-offs, but many people miss them. Any time you’re going on a trip or running an errand for business, you can get a standard rate for mileage, or you can take your actual expenses for gas and repairs. This can get complicated to do correctly, so you might want to talk to your accountant or tax advisor for this.
In fact, you may want to discuss these write-offs with a professional anyway. Many of the rules change from year to year, and the rates certainly do, so you’ll want to make sure to get them right.
Incorrect deductions – especially in your favor – can lead to audits and worse, so you’ll want to be very careful. An expert can help you make sure you take business write-offs correctly, simultaneously covering you and increasing your profits.