Let it be known: I am not an accountant. That’s no secret if you’ve ever met me. I really dread the day designated for calculating taxes. It’s not that I’m terrible at math or that I am bad at filing taxes…it’s just that looking at all the numbers leaves me exhausted before I even begin. I will say that there are great tools available now such as easy to use tax bracket calculators. I truly envy folks who earnestly enjoy working with numbers. I’m just not one of them.
When tax time rolls around, I usually end up sitting at the table, whining and squirming around, while my husband asks for numbers off of my expense spreadsheet. I’m like a kid who is told to stay at the table until the vegetables have all been eaten off her plate. I’m distracted and chatty and I’d rather be anywhere else. But every year I muddle through. And every year it gets a little easier and I learn a little more.
Today, I am sharing 10 easily over-looked items that you can deduct from your taxes as a small business. This is not an exhaustive list of every deductible item. For a full list, go straight to the source at the IRS website. There, you’ll see that: “To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.” If reading through the IRS jargon is difficult, I highly recommend writing down questions and meeting with a business advisor or tax specialist so you’ll be fully informed come tax day.
Per the IRS statement, you are eligible to deduct any cost that is common in your field and helpful to your business. If it’s common and helpful—you are not required to pay taxes on it. At first glance, you might be thinking that this only includes big things like equipment, office rent and utilities, office supplies and marketing materials—but there’s so much more. In the list I’m presenting to you today, I will go over tax deductible items that are easily overlooked or forgotten by new entrepreneurs.
Classes, online courses, webinars, seminars, lectures or certification programs related to your business are fair game for a write-off. Anything you are doing to further your knowledge of your field or knowledge of how to run your business falls into this category. This can also include private consultations. Keep receipts and records from all events and consultations you attend in regard to your business.
Any materials you purchase to teach yourself about your field or operating a business fall into this category. This includes subscriptions to trade publications or teaching websites (like Lynda.com), reference books, ebooks, and anything else you may purchase to learn on your own.
3. Mileage and car expenses.
If you are working for yourself, chances are you’ll be driving to a lot of meetings (especially if you are working out of a home office unfit for company.) Keep a notebook and track the miles you drive on business-related errands. Drives down the street to your favorite, local coffee shop and over to Staples for another ream of paper can add up quickly. No need to save gas receipts, you’ll get a deduction based on the miles you drive. While all business errands and meetings are deductible, a regular commute to and from the office is not.
4. Parking and tolls.
Since we are discussing car costs, let’s not forget this easily overlooked expense. Any tolls you pay or parking fees are deductible. Save your receipts or digital proof of payment. If you pay a parking meter, note the cost in the same notebook you keep to track your mileage. You can check out how to write off parking tolls here.
5. Public transportation.
If you don’t drive yourself, remember to track and write off costs incurred through public transportation. This includes taxi, bus, subways, and airfare if you are traveling for work.
6. Food and drinks.
If you meet a client over coffee or lunch and pick up the tab you may deduct the cost. You may deduct food and drink costs that incur anytime you are doing business over food. This does not apply, however, if you are all alone working from the coffee shop—in this case, your latte is not deductible.
You can deduct $25 per person per year in gifts. This means you don’t need to be stingy when it comes to saying “Thank You,” to a client or giving an employee a pat on the back. Anything you consider a gift to someone related to your business should be tracked and reported come tax-time.
A stamp here and there doesn’t cost much, but eventually, they do add up. Postage and postage supplies (mailers, envelopes, insurance on mailed items, stamps, address labels, boxes, packing tape, packing peanuts, etc) qualify for a deduction.
If you join a professional association, like a Young Professionals group or your Chamber of Commerce, you are eligible to deduct the annual dues on your taxes.
10. Charitable donations.
If you offer your product or service as a donation, don’t forget to write it off come tax time. Log the donation just as you would a regular sale. Pay yourself, or your employees for the time involved in creating the product. On your tax forms, you’ll write off the amount of money the product is worth. For instance, if I donate a photo session worth $300 to a charity auction, I would have in essence made a $300 contribution to the event—and therefore would deduct $300.
I hope all this makes sense to you. Like I said, I’m no tax pro. But these are valuable items I’ve learned over the years. I wish I would have known some of these things sooner because I haven’t always tracked and deducted them. How about you? Is there an item have been surprised qualified for a tax deduction? What’s an item you deduct that you find easy to overlook?