Are you a freelancer, Uber driver, designer, business consultant, small business owner, trade or a self-employed professional? Excellent, this post is for you.
First, thank you for your hard work! I am a business owner myself, and I know, like nobody else how challenging this role can be!
Second, America was built on the hard work and contribution of the most dedicated, determined, hard-working and resilient people, like you! America loves entrepreneurs and provides many tax advantages that favor small business.
The post reviews the most common small business tax deductions to assure you understand your rights and minimize your tax burden.
1. Employee Wages
Wages, salaries, bonuses, commissions, vacation, and sick pay
2. Employee Educational Expenses
Tuition, books, professional education seminars
3. Employee Benefits
Accident & Health Plans, Adoption Assistance, Cafeteria Plans, Dependent Care Assistance, Life Insurance
4. Rent and Lease
Office and home office expenses, equipment rental, lease warehouses, leased cars, taxes paid for lease equipment
5. Interest paid on debt
Interest paid on all debt forms, loans, lines of credit, and other business-related liabilities
6. Payroll Taxes
Social security, Medicare, unemployment, state, and federal taxes paid
7. Real Estate Taxes
Property taxes paid on business real estate
8. Personal Property Taxes
All taxes paid to state and local government on your personal property used for your trade or business
9. Insurance Premiums
Insurance premiums for insurance are covering: fire, storm, theft, accident, bad business debts, liability, car insurance on vehicles used for business, life insurance for officers and employees. Self-Employed Health Insurance Premiums (yourself, your spouse and family).
10.Business Start-up Costs
Deduct up to $5,000 of business start-up and $5,000 of organizational costs.
11. Bad Debt
All unreceived account receivable balances, when your customers were billed/invoices, but the payment was never received.
Repairs, registration fees, gas, taxes, miles were driven for business
13. Client Gifts
Gifts purchased as giveaways to clients limited at $25
14. Charitable Donations
Donations made to qualified charities, such as 501(c) (3), limited to a certain percentage of income
15. Club dues
Membership fees, club fees, business and professional organizations, boards and trade associations
16. Continuing Education
Any types of professional and continuing educations expenses
17. Depreciable Assets
Property, vehicle, and equipment purchases
18. Franchise, Trademark, Trade Name
Costs incurred from registering franchise, trademark fees, or trade name fees
19. Interview Expense Allowance
Expenses reimbursed to a candidate for transportation, lodging and such during the interview process. Meals are subject to a 50% limit.
20. Home Office
You have two options, deduct a portion of your home expenses prorated based on square footage that is occupied by business, versus take safe harbor deduction of $1,500
21. Legal and Professional Fees
Fees paid to an attorney or a business professional, such as a CPA consult.
22. License and permits
Fees and licenses to operate your business, such as real estate license.
23. Meals and Entertainment
All expenses in the category are only 50% deductible.
Website, flyers, ads, handouts, business cards, promo software
25. Tax Prep Fees
The fees you paid to a CPA or an IRS enrolled agent to prepare your income taxes to return
Transportation, lodging and other travel expenses
27. Penalties and fines
Contract breach performance fines and penalties paid
28. Property repairs
Any type of property maintenance, touch-ups, painting, cleaning, fixing etc. Excludes major repairs and replacements.
Trade, business and professional publications, journals and magazines subscriptions
30. Supplies and Materials
Office supplies, stationery, paper, printer ink, light bulbs, cleaning supplies
Business phone line costs
32. Payments to Contractors
Payment to firm`s contractors, freelancers, bookkeepers and others that provide service to a trade or a business for a fee. Check with your tax preparer, you may need to issue a 1099 form to your contractors.
Electricity, water, gas, landline, heat and air conditioning
34. 401k Contributions
Your contributions to pre-tax retirement plans, subject to IRS imposed limits. Standard IRA: No limit SEP IRA: 25% of your income Roth IRA: $5,500. (Credit: Fits Small Business Expense Category List)
This post in Russian: 34 Small Business Tax Deductions
It took me a long time to understand what is tax deductions and what types of expenses and expense categories could I could report on my tax return. For example, I recently started to record my business mileage using Mile IQ smartphone app. I have to tell you; it was shocking to learn how many miles I drive for business each year! After testing the app for a few months, I asked my spouse to install it as well. The app records all the miles we drive automatically since it has drive-sensor and it is self-activating. Just last year we were able to include mileage an expense category on our tax return, and this one thing saved us thousands of dollars in taxes!
Do your due diligence, review your expenses and categorize them appropriately. The step will pay off handsomely during tax reporting time! Good luck on your taxes and thank you for reading!
Please note, all the information in the post was sourced from Department of the Treasury, IRS Publication 334 – Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ). The publication was released for use in preparation of 2018 Tax Returns and serves as an official guidepost for all small business owners in the U.S.
FREE Small Business IRS Tax Guide
- Full text of IRS Publication 334 in English
- Russian IRS Income Tax Preparation platform, including videos, links and other helpful resources
Disclaimer: Logio Solutions LLC and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
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