Are you neglecting to deduct business expenses on your tax return?
You could be leaving money on the table. Whether you’re an established entrepreneur or just setting up shop, you can save thousands of dollars in tax deductions. So which expenses qualify? To receive a tax deduction, business expenses must be necessary and typical for the type of business you run.
There are exceptions to the rule. You can’t write off speeding or parking tickets. But don’t let this stop you from saving serious money on your tax return. Place those dollar bills back into your wallet by adding these commonly overlooked business expenses to the list.
1. Costs to Keep Your Business Running
As you maintain your business, you’re bound to purchase office supplies and advertising. But did you know that you can also write off equipment repair, business calls, and office furniture payments?
There are limits though.
- If your business goes under, you can’t deduct costs for exploring a business opportunity. But you can deduct costs for products, materials, and supplies in your inventory.
- You also can’t completely deduct costs from starting your business. Instead, you can deduct up to $5,000 the first year and write off any remaining startup costs periodically over the course of 15 years.
- Every cent you invest into your business is referred to as either a capital expense or a current expense.
Capital expenses are your business asset purchases, long-lasting equipment that will continually improve your business in subsequent years. Because capital expenses normally don’t wear out after the first year, these expenses are depreciated and deducted over a period of time.
Current expenses are charges for equipment or services used every day to maintain a profitable business. They’re normally used up in the first year, so you can deduct the total cost of current expenses on your tax return.
- Repairs that add value to equipment, prolong the lifespan, or adapt an item to a different use can be deducted on your tax return.
- Advertising fees to create promotional materials like business cards and print, radio, yellow pages, and banner advertisements are completely deductible.
- If you regularly use the phone to call clients or customers, you can deduct charges relevant to your business.
Be forewarned though: if you try to mask personal purchases by claiming them as business expenses, you might be in deep waters when your tax return triggers an audit.