Understanding the Most Overlooked Tax Deductions
It is always important to keep good records to ensure your tax preparation goes smoothly. However, your tax preparation specialist should also be told about some of the commonly overlooked deductions small business owners can use to reduce their tax burden. Some of the deductions you may not know about include:
- Home Office Expenses – if you’re using a room specifically for the purposes of working from home, you can deduct the expenses associated with maintaining the office. This deduction allows you to claim a portion of your rent or mortgage as well as utility expenses. Keep in mind, this area must be totally dedicated to an office; using your personal computer for business purposes will result in you being unable to claim the computer as an office expense.
- Keeping Technology Updated – there’s no reason to work on an outdated computer or suffer with a slow printer. New software, computers, printers are all deductible on your taxes provided they are used specifically for business. Keep in mind, if you maintain a website for your business, the costs associated including hosting, domain registration and updating content may also be deductible.
- Trade Publications and Subscriptions – if you attend trade shows, have online or physical delivery subscriptions to trade magazines or publications you may be able to deduct these costs on your taxes. The key to ensuring they are deductible is making sure they are related to your business.
- Automobile and Travel Costs – travel expenses can be deducted provided they are properly documented as business-related. This doesn’t mean your family has to be left behind, merely that you keep personal expenses separate from business expenses. For example, if you take your family out to dinner during a business trip, it’s not deductible; however, if you take a client out, you may be able to deduct up to 50 percent of the costs. It’s important to note the client’s name and reason for the meeting. If you have only one family vehicle, it will be difficult to categorize the business use. In most cases, it’s a good idea to have a separate vehicle for business use; talk to your tax professional for additional information about the deductions associated with automobiles.
- Overlooked Fees and Taxes – many small business owners are not aware they can claim one-half of the Medicaid and Social Security taxes they’ve paid if they’re self-employed. This deduction may be taken on personal taxes, not your business taxes. You can also deduct the cost of health insurance premiums, bank fees, accounting fees and interest payments paid to credit card companies if you used a credit card to buy work-related items such as computers.