What Expenses Can You Write Off?

In our quest to pocket as much profit as we can as small business owners, many of us wonder how we can minimize the amount we have to pay in taxes every quarter. While talking to a tax accountant is always a good idea, this article explains the basics of how to determine what business deductions you can legitimately take. It’s important to have a clear understanding in this area so you don’t mistakenly try to deduct expenses that aren’t allowable by the IRS (which may potentially trigger an audit). Read on to learn more.

So Does My Laptop Count as a Tax Deduction?

The simple answer is yes if you are a business owner. When you purchase items and then use them for the purpose of conducting your business (like your laptop, for instance), they generally qualify as a tax deduction. Especially if you’re using the item either wholly or mostly for business purposes.

Wait, but let’s back up for a second. What exactly is a tax deduction (or “write-off”) anyway? In a nutshell, it’s a business expense that reduces your taxable income, which is beneficial because the less taxable income you have, the less you’ll need to pay in taxes.

To figure out if an expense is tax-deductible ask yourself the following questions:

• Is this item necessary for me to conduct my business? Put another way: do you need it to perform your work? If the answer is no, then it might not be a write-off. If you answer yes to this question, then move on to the next one …

• Is this item common in my industry? Every business sector has its own list of supplies, materials, and equipment that it generally uses. The IRS considers this when it examines the items a business has claimed on its tax return, so make sure you aren’t trying to write off expenses that have nothing to do with your industry (or they’ll likely get flagged).

So, in summary, if the items you’re claiming are being used for business purposes and are ordinarily found within your industry, then it’s safe to say that you can likely write them off.

Some expenses that are frequently written off by small business owners include office supplies, equipment repair and maintenance costs, advertising and website fees, business-related vehicle mileage, shipping expenses, home internet charges (a percentage if you use it for business), credit card processing fees, industry publications, professional memberships, travel expenses, and even insurance (health, dental, long-term care, etc.) premiums.

A Final Word From Tuesday P Brooks Owner of AJOY

We all want to do everything we can to lower the taxable income for our businesses … but take care not to be overzealous. While we all desire to owe less in taxes, it’s crucial that you evaluate whether your write-offs are both necessary and ordinary before including them on your tax return so you don’t get in trouble with the IRS. Also, be careful not to reduce your profit so much by writing off business expenses that you don’t qualify for investor capital or bank lending. That’s called shooting yourself in the foot! But, of course, if you have valid tax deductions, don’t hesitate to use them and reap the benefits of being a small business owner. Until next time!