(ThyBlackMan.com) Being self-employed is very rewarding. You create your own hours, hire people, and get to run the business the way you want. On the other side, there are many expenses that come along with owning your own business. The good news is that there are many deductions you can take to offset the high taxation of the small business owner that will help you to keep more of the profits in your pockets.
Mileage
When you travel as a sole proprietor every drive you make to benefit the business is tax deductible. The deductions can include tolls, parking, gas, auto repairs and car insurance. Make certain to keep accurate records on paper and the reason for every trip, in a
separate notebook, so that in the event of an IRS audit you have all the documentation to support the deductions. Each tax year the IRS issues what the allowable deductions per mile are so that all you need to do, or your accountant, is to plug in the numbers.
Telephone services and protection
A land line telephone and a cell phone play an important role in your business. Aside from e-mail, they provide you with a way to directly connect to your customers, suppliers, make travel arrangements and handle every aspect of the business. There are percentages that you are able to deduct depending on the use. For instance, if you work from home and use the same line that you use for personal calls you would not be able to deduct anything but the actual calls made. However, if you have a second line that you use solely for the business you can deduct the entire bill. When it comes to cell phones the same philosophy follows. Since cell phones are portable devices, any sort of protection added, like iPhone cases and screen protectors, are also deductible.
Home office
One of the benefits of working from home is the low overhead. In addition to the savings you already enjoy by not needing to rent office space, you are also able to deduct the room you use for your office. All you need to do is measure the room and divide it by your home’s square footage. You can then claim that percentage of the rent or mortgage, home owner’s insurance, gas, and electricity on your yearly tax return.
Furniture and office supplies
Any piece of furniture and equipment like a desk, chairs, cabinets, computers, copiers, a fax machine, mouse, and keyboard are all acceptable deductions for your small business. In addition, you are also able to deduct 100% of the cost of your paper, ink and toner, pens, markers, software, and files. Make sure you keep all your receipts in one location in case you need to show proof at a later date. There are various forms to complete and limits on the amount that you can deduct on furniture and equipment. If you do your own taxes, just make sure that you file your return with all the necessary forms attached and follow the guidelines.
Make charitable contributions
If you donate to a specific charity such as your church, feeding the homeless or another foundation, you are able to deduct a percentage of the donation. This is an itemized deduction on your return and the deduction can vary anywhere from 30 to 50%.
Travel and entertainment expenses
When you are self-employed getting contracts often means wining and dining the clients. This can become quite expensive especially if one of your potential customers is half-way around the world. The good news is that whether you fly, take the train or bus, the expense is recoverable. This includes not only the travel expense but also the hotel room, car rental, dry cleaning, and tips. Also, when you are entertaining and it involves taking clients to lunch or dinner you are able to deduct half of the cost.
Health insurance and retirement plans
When you run your own business you are able to deduct the full cost per year of the medical insurance. As a double bonus, if your spouse also works for you as an employee, you can deduct their premium as well. If you have a SEP IRA or Keogh retirement plan you can deduct any contributions you made.
Before sending in your tax return, make sure that you take every deduction allowable by the IRS. Since laws change from one year to the next, it’s always beneficial to do a little research first. This way you’ll ensure that you save every penny that’s best used to grow your business.
Staff Writer; Charles Day