As an entrepreneur, you incur business expenses that are fully deductible against your business income. According to the IRS, these expenses are usually deductible “if the business is operated to make a profit.”
However, even if you keep a sharp eye out for deductible expenses, it is not uncommon to miss a few. You may be missing an opportunity to maximize your tax deductions.
Some overlooked tax deductions include:
- Advertising giveaways and promotion. Advertising and promotional expenses are deductible, including flyers and catalogs.
- Bank service charges. Bank charges, services, penalties, check writing and credit card fees are deductible. Check printing costs are also deductible.
- Business association dues. Falling under the Other Expenses category, dues and meetings can be deducted.
- Business gifts. Tax deductions for business gifts are limited to $25 per recipient in any one year, but you get a 100% deduction for each business gift up to $25. The free product samples that you give to publicize your products, however, are not considered business gifts.
- Business-related magazines and books. Subscriptions are deductible; books, magazines, newsletters, newspapers, and all other publications are deductible. The cost of buying and maintaining your ledgers is deductible.
- Casual labor and tips
- Casualty and theft losses. Business losses from fire, storm or other casualty, such as theft, shoplifting or vandalism are fully deductible to the extent they are not covered by insurance.
- Coffee and beverage service. These are considered office expense, and therefore, can be considered part of your deductible.
- Commissions. Commissions paid to outside salespeople or companies, commissions paid for referrals, finders fees, and the like are deductible. Real estate commissions, on the other hand, must be added to the cost of the real estate and depreciated.
- Consultant fees. As part of the expense category Commissions and Fees, consultant fees are deductible.
- Credit bureau fees
- Education to improve business skills. For the self-employed, the cost of education is deductible if the education maintains or improves a skill required in the business (but not if the education is used to meet minimum educational requirements). For employer-paid education for employees, employers can deduct and employees can exclude from their income up to $5,250 annually for education expenses.
- Office supplies. Office supplies is a “catch-all” term that can include all kinds of low-cost business purchases.
- Online computer services related to business. The costs of Internet access are fully deductible if used only for business. Pro-rate the cost and deduct only the business portion if used partly for personal use. The cost of setting up a Web page is deductible; although if the amount is significant, it may have to be amortized over several years. Better yet, consult your accountant on this!
- Parking and meters. Parking is deductible. If you take the standard mileage allowance, parking is deductible in addition to the mileage allowance. Parking tickets, however, are not (although towing charges are).
- Petty cash funds. Petty cash is a small fund of cash some businesses keep to pay small businesses. The expenses are usually for office supplies and are deductible.
- Postage. Postage, post office box rents, and postal permits are deductible.
- Promotion and publicity. Promotional expenses are deductible. These may include handouts, samples, news releases, audio and video productions, brochures, premiums, or some service, performance or show. Be careful though in classifying expenses as either promotional or entertainment: entertainment only receives 50% deduction.
- Seminars and trade shows. Most business seminars are deductible.
- Taxi and bus fare
- Telephone calls away from the business
Just because you did not get a receipt does not mean you cannot deduct the expense, so keep track of those small items and get big tax savings.
Recommended Books on Tax Deductions for Small Businesses:
- Deduct It!: Lower Your Small Business Taxes
- 475 Tax Deductions for Businesses and Self-Employed Individuals: An A-to-Z Guide to Hundreds of Tax Write-Offs
- HOME BUSINESS TAX DEDUCTIONS: Keep What You Earn
- Tax Deductions for Professionals
- Taxpertise: The Complete Book of Dirty Little Secrets and Tax Deductions for Small Businesses the IRS Doesn’t Want You to Know
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Category: Tax Management