Tax Deductibles for Entrepreneurs

This is a guest post by Mariana Ashley

Tax Act, H&R Block and Turbo Tax have been heavily promoting their services for the past month. This can only mean one thing— tax filing season is here. While some may have spent a lot of capital getting their start-ups off the ground, entrepreneurs and small business owners alike may just be able to write-off most of their business-related expenses by claiming an array of deductions this tax season. To learn some deductions you are most likely eligible to place on your tax return, continue reading below.

1. At Home Business. If you run your business through your home, you may very well qualify for a Home Office Deduction. This is usually the easiest one to qualify for, but all too often people forget that it even exists. There are two different ways that one can qualify. The first is assigning at least one room within your house (for example a spare bedroom or den) as your principle place of work, meaning you do all of your business there. This also means that your designated room can’t have multiple-uses: i.e. family game room or act as guest bedroom. This is called the “regular and exclusive use.”  Then there’s the “principal place of business” deduction. This allows small business owners who own multiple offices to claim a deduction only if the company’s “headquarters” reside within the individual’s home. This can sometimes be a difficult deduction to claim as strict documentation, receipts and ledgers are generally required to show proof that the business’ main transactions occur within the home.

*The key to the Home Office deduction is that you have to actually live in the home. Do not try and abuse the system. Because if something does not calculate right, you will be subject to an audit and you can get heavily penalized if things don’t check out right. Not sure what we’re talking about? Instead of buying a price office space at a corporate building, some small business owners buy extremely cheap homes and condos and make it “seem” as if they live there by adding furniture and food in the fridge just so that they get to claim deductible. Risky move.

2. Travel and Entertainment Costs. If you’ve spent quite a bit of your expenses burning gas to go meet clients across town, jetsetting to meet suppliers in another city, or you’ve emptied your pocketbook trying to wine and dine investors, you should be able to get some of your money back by claiming an Auto, Travel or Entertainment deductible respectively. As long as you can prove that “matters of business” was discussed before or after the meal for example you should be able to earn this deductible without complications. How to show proof? Most keep their receipts, date it, and write a short note about what was discussed that day and with whom.

3. Advertising Costs.  The money you spent printing out fliers, making business cards, sponsoring your local sporting team and putting ads in the newspaper can also be claimed as a deductible as long as the ads are directly linked to your business.

4. Office Supplies Cost. We’re not necessarily talking about legal notepads and pens and pencils, but if you had to purchase some “bigger” office supplies to improve the functionality and performance of your business—perhaps a computer, video recorder or a digital camera for example—you may be eligible to get a deductible on these items as well. As long as the piece of equipment is utilized 50% of the time to conduct actual work and you have the proper receipts, you should be able to qualify.

Of course these aren’t the only deductibles that you may be entitled to. Make sure to do additional research so that you can be better prepared to file your taxes and get the breaks you’ve earned.

By-line:

Mariana Ashley is a freelance writer who particularly enjoys writing about online colleges. She loves receiving reader feedback, which can be directed to mariana.ashley031 @gmail.com.

Image:http://www.freedigitalphotos.net/images/view_photog.php?photogid=2745

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