You probably don’t enjoy thinking about taxes for your personal or business income. But if you want a favorable outcome from the IRS next April, it’s never too early to start. Small business tax write-offs, in particular, require forward planning if you want to enjoy their benefits.
Understanding Small Business Tax Write-Offs
A huge variety of costs can count towards your small business tax write-offs, as long as they would be considered “ordinary and necessary” business expenses by the IRS. But even if you’re familiar with expenses, you could be missing out on small business tax write-offs that you’re not aware of. Let’s take a look at five common small business tax write-offs to plan for.
1. Home Office Expenses
According to IRS home office guidelines, if you have a home-based business or work as a freelancer, you can deduct five dollars per square foot of your home (up to 300 square feet) that you use for business purposes. To qualify, your work area has to be dedicated exclusively for business-related purposes and used on a regular basis.
2. Depreciation
In many cases, rather than writing off the cost of items you purchased for your business, you can instead claim exemptions for the value that those assets lost over the tax year. Bigger purchases, such as computers, vehicles, or machinery all depreciate, and that depreciation can be taken off of your taxes.
3. Career Education
Educational expenses are frequently overlooked by working professionals. To qualify, educational expenses must simply bring value to your work. If you took a course or workshop that improves your skills or helps maintain your professional expertise, you can claim their full cost on your tax return.
4. Child and Dependent Care
Another often-overlooked deduction is the cost of care for your children or other dependents. The cost of care for children 12 and younger and adult legal dependents (such as a spouse) with disabilities can be claimed as a small business tax write-off.
5. Business Meals
If you ever conduct business meetings over a meal or entertain clients, half the cost of any food and drinks you purchase can be claimed. To qualify, the meal needs to relate to your business. In order to prove this, you are required to document the date and location of the meal, your business relationship to the person (or people) you dined with, and the total cost of the meal.
Properly Claiming Small Business Tax Write-Offs
While these (and many more) expenses can grant you significant relief when tax season rolls around, it’s essential to utilize them with care. Even if you know about current or past standards, many criteria, such as the Standard Mileage Rate for using your vehicle, change frequently.
Improperly claimed expenses can cause a world of legal trouble, especially if you don’t keep the proper receipts to prove the nature of your expenses. If you have run into trouble with your expenses or just want legal advice on how to properly manage your small business tax write-offs, consulting a qualified tax attorney can save you from issues and expenses down the road.
Get the Most From Your Tax Return with Ahmad Law
Sophia Ahmad Law, APC was founded in 2016 in the San Francisco Bay Area. We specialize in tax, corporate, and immigration law and represent both businesses and individuals locally, nationally, and internationally.
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