As the year draws to a close, it’s time to think about the best ways to reduce your tax liability. If you own a business, you have quite a few options to help you on your way to a lower tax liability. Make sure, of course, that you have kept good records, and that you can back up the tax deductions you are taking.
If you have traveled for business purposes, make sure to deduct the costs. You can deduct the cost of airfare, hotel stays, and even deduct a portion of your meals. If you drive your own car, you will receive a mileage deduction from the IRS. If you entertain a client, and discuss business (be sure to record what was discussed) a portion of the cost is tax deductible. That can be a great boon if you have spent money to travel to business meetings and to make connections.
Equipment and Supply Purchases
Now is a great time to stock up on office supplies and make equipment purchases. If you buy a new printer or computer, or if you are re-stocking paper for your copier, you can deduct those costs. Pens, paperclips, chairs, a new desk, and even larger equipment that you might need for your business are all tax deductible. If you work from home, though, you do need to be careful; the items you buy must be for your business if you want to deduct them. Not using them for personal purposes, or giving them to your kids. Make sure that you keep the receipts, and that you are sure to use them for the benefit of your business.
Business Use of Your Home
It is also possible for you to deduct the value of the business use of your home. In order to do this, though, you need to have a designated area for your home office. It doesn’t have to be an entire room, though. Even if you only have a 6×8 space, encompassing your desk, you can consider that for the business use of your home. You will have to figure out what percentage of your home it takes up, though. So, if you have a 6×8 space, that is 48 square feet. If you have a home that is 1,500 square feet, your home office would take up 3.2% of your home. That means that you can deduct 3.2% of your mortgage, and your gas and electric utility costs, for the business use of your home.
Also, you can deduct your Internet costs if necessary. If 75% of your Internet usage is for your business, you can deduct 75% of your Internet costs. If you want to deduct the cost of a phone, line, though you will have to get a dedicated line, just for your business.
Additionally, you can also deduct mileage or actual use for vehicles used in your business. If you subscribe to trade publications, you can deduct those costs. Additionally, you can deduct business cell phone use on your taxes. Make sure you speak with a knowledgeable tax account about filing your taxes, and what deductions are available to you as a business owner.