Tax write offs and breaks can be one of the biggest benefits for those who are self-employed or small business owner. But with a complex code and list of credits and deductions, do you know which you can claim, and those you cannot?
If you ask a small business owner or someone who is self-employed where they file their taxes, they’ll likely give the same response: their eyes gloss over and they give you a blank stare or they take their taxes to a tax professional.
Since every situation is unique, and the number of credits and deductions that are offered to small business owners or those who are self-employed feels endless, we made a list of the most popular deductions and credits for those who are self-employed or own a small business:
The Home Office
To claim your home office, it must meet the following conditions:
- Exclusive & Frequent Use – the space must only be used for conducting and operating your business, and must be used frequently. You must perform the most important aspects of your business in the space.
- What doesn’t qualify – home offices that are used for personal use, kitchen tables turned desks, guest rooms with a desk, etc.
To Claim it: Using the simplified method, which allows for $5 per square foot of the space up to 300 square feet, calculate what space in your house is used exclusively for your business and use the formula to calculate the deduction amount. Using the standard method, you’ll need to use Form 8829.
Supplies and Associated Costs
Depending on your trade or professional service you provide, many supplies, materials, and fees related to conducting your business activities are deductible. Common items include:
- Marketing materials & costs
- Office supplies
- Subscription services related to your business (telephone, internet, etc.)
- Business or office-related equipment
There are a few not-so-common costs for business that many people do not claim but could:
- Website hosting and domain costs
- Technical or business-specific programs or software
- Business meals (you can claim up to 50% of your expenses)
- Business insurance (Homeowner’s or Renter’s can be claimed with your home office deduction)
- Costs for professional education or trade associations related to your business
Your Vehicle and Mileage
You may be surprised how often these deductions are overlooked:
- Vehicle Mileage – keep a record of the miles you drive for business-related activities and calculate using the Government’s standard rate for your deduction amount. Remember that you can also deduct business-related travel expenses incurred by your spouse who is traveling on your behalf.
- Vehicle Maintenance & Upkeep – your tax write off amount is proportionate to the amount you use your car for business activities. That means if you use your car exclusively for business, you can write off or claim the full cost of maintenance. If your use is 50% of the time, you can claim half of the cost of maintenance.
Advice for Filing
It can be difficult to keep up with your receipts without help – which is why we suggest using a bookkeeping software to keep things organized and make tax time a lot easier. But when it comes to filing your taxes, if you chose to file your taxes online, consider a service that provides additional support if you need it. eSmart Tax is backed by the tax professionals at Liberty Tax Service, and we give you the option to finish your return in a store if you need additional help. They can assist you with what you can claim as well tax breaks or write-offs you may be missing.
We understand you have a lot to worry about as a small business owner or if you are self-employed. So we’re here to help. We provide helpful, valuable tax and business help on The Daily Deduction throughout the year. If you enjoyed this article or found it helpful, Like us on Facebook and follow us on Twitter to get more articles like this posted directly to your timeline or newsfeed! You can also share this with your social network or friends by clicking on the share buttons above or below.