As pictured above, sometimes being an entrepreneur can feel like your on top of the world or like you’re facing down all the giants before you. We’re here to help with ways to you can save money and grow your small business!!
According to entrepreneur.com there are 5 little known deductions many entrepreneurs don’t know about:
What many entrepreneurs miss is that they can deduct a portion of their home related bills from their taxes. According to Intuit Turbo Tax this includes utilities, homeowner’s insurance, HOA fees, security, and general maintenance costs. Mortgage and property taxes can also be deductible expenses if you qualify for home office deductions! The caveat here is you can only deduct whatever percentage of the house your home office takes up. For example if your office takes up 20% of your house, you can deduct 20% off those aforementioned expenses.
There are 2 options according to the IRS.gov website; you can either use a percentage of square feet OR do a simplified deduction which is $5 per square foot up to 300 square feet ($1,500 max for those of us mathematically challenged). For complete details on which is better for your situation visit the IRS page linked above and run down the list (or you could call or email your account manager at eeCPA – just saying).
According to Forbes there’s one more caveat this year, which changes with the new TCJA (Tax Cuts & Jobs Act). Employees can no longer claim a home office on their taxes, only entrepreneurs and business owners.
Travel expenses can be a super useful deduction. H&R Block offers a very in depth look into travel expenses but I’ll sum it up for you. According to H&R there are 4 golden rules to travel expense. Always keep organized records of each trip (either in a notebook or a spreadsheet), keep receipts, only deduct that which is away from your tax home, and finally only deduct expenses which as “ordinary and necessary”.
A tax home by the way is your usual place of business or work, in my case it would be Phoenix, AZ (even though technically I live in Mesa, AZ). So if I left Phoenix to go to say… NYC. I could deduct from that trip. The article goes into pretty deep detail so feel free to check it out if you need more information!
Ordinary and Necessary means any expenses that is “ordinary” to your trade and “necessary” is an expense that is helpful to your business. For instance computers for a software development company would be both ordinary and necessary.
While your daily commute from home to office is not tax deductible – the travel between your home office and a destination in which work will be done by your company is. Say a painter has to go from his home office to a client’s house, that distance is deductible.
As mentioned before, the H&R Block goes into great depth about this topic. If you have any questions about what you can deduct it’s best to consult a tax professional.
HAVE YOU SEEN OUR BLOG THEMED SALE FOR THIS MONTH??? Check it out on www.eecpa.com/highpoints