On today's episode of the podcast I highlight some of the most overlooked tax deductions that entrepreneurs are missing.
Don’t forget, the Tax Season Playbook is available for purchase! The Playbook is a 3 week, semi-live course to help you prepare and file your taxes. Through this program I’ll help you organize your tax documents and bookkeeping and we’ll have a tax filing party that ends with you being all set and filed! Also, stay tuned, the release date of the Profitable Pro Bundle has been rescheduled for later this year. The playbook starts next week so get yours today!
Most overlooked tax deductions:
Commissions and fees - This is the title of a category on a Schedule C. When I mentioned commissions and fees I want to talk primarily about processing fees. Let’s say I charge you $1,000. There is then, let’s say, a 3% processing fee that comes off the top from your payment processor. $970 enters your bank account. What a lot of people will do is report $970 in income but that is not correct, we got $1,000 in income. You want to make sure you’re taking your processing fees as a deduction, and they should be detailed in your bookkeeping.
Education - Deductible if you can show the education maintains or improces skills required for your exisiting business or are required for you to maintain your current status. Graduate level courses are typically not deductible, this is more for things like required continuing education. For example, I have to do 25 hours of continuing education for my law license every three years. If I buy a busines-related book I include that as well. Same for in-person conferences you’re travelling to.
Car and truck expenses - You may take a deduction for business uses of your vehicle. You have a choice of taking actual expenses or the standard mileage rate. You multiple business miles driven by the applicable reate. One requirement is you use the standard rate if you used it the first year you had the vehicle in business. You may take parking and toll fees in addition to the standard rate. Commuting miles are not tax deductible.
Home office - The rules are strict. You may only deduct if you are in business, you use the home office exclusively for business unless you store inventory or run a daycare, and you use your home office for business on a regular basis (so no home office that doubles as a gym) plus one of the following additional requirements: your office is a principle place of business, you regularly use the office for work activities and have no other fixed location where you perform administrative activities, unique clients and customers, a separate structure on your property you use as an office, you store inventory/products in the space, or you run a daycare center.
If you meet the criteria you can deduct direct and indirect expenses. A direct expense would be something like a desk chair. An indirect expense would be something like rent, utilities, HOA fees, even a portion of your house cleaning. You cannot deduct mortgage but can take a depreciation deduction. Much like the car/truck expenses, there are specific rates you can take that I highlight in the podcast episode.
Travel - Deductible business travel is overnight travel away from your tax home. You can deduct travel, expenses incurred while there, internet fees, 50% of meals and 100% of lodging incurred while travelling. If you’re travelling within the US you can deduct 100% of travel costs if 50% or more of the travel is for business.
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