Common Business Expenses

Automotive Deduction

For many self-employed taxpayers this is their main business expense. Those who file Schedule C with their personal return are allowed to use the standard deduction and just deduct mileage, whereas partnerships and corporations must use actual expenses. Either way, the amount of business miles driven in the year must be reported.

Mileage Log

Either way, the IRS requires a written log of all business mileage which includes: date vehicle was used for travel, destination, purpose of travel, the total miles driven to all business-related locations (beginning and ending at your home.) This amount of business mileage is then compared with the total mileage driven on that vehicle during the year to come up with percentages applied to deduct actual expenses.

Actual Expenses

This includes common auto costs such as gasoline, oil changes, repairs and car washes. The purchase of a new vehicle is depreciated over a period of five years, although it may be expensed in some situations. Interest is deductible, as are licensing fees and insurance. Leased vehicles fall under special rules that may limit their deductibility. Parking and tolls are deductible separately even for those who claim standard deduction.

Advertising costs

This includes cost of a website (web hosting, domain name renewal, SSL certificates) as well as other forms of advertising and promotional costs.

Wages and Payments to Contractors

If more than $600 was paid to a non-employee, you must file at 1099-Misc for with the IRS prior to February 1st. Employee benefits must also be reported and often must be included on employee’s W-2s.

Capital Assets

Depreciable items include large tools, office furniture, electronics, software, and computer equipment. Include the date item was placed in service.

Insurance

Includes liability and errors & ommissions policies.

Interest paid on a business loan or mortgage

You can claim the entire mortgage interest if the business is located outside your primary residence or it is a business loan/line of credit. If the business is located in your home, you will need to calculate the percentage of home used regularly and exclusively for the business.

Professional Services

This includes costs for accounting, legal fees, and the portion of tax preparation relating to your business.

Office expenses

This including postage and office supplies.

Equipment Rental and Repairs

Rent or lease payments and repair costs for equipment used solely for the business.

Licenses and Taxes.

Cost of business license and amounts paid for state tax, excise tax, or sales tax.

Travel Expenses

If you need to travel more than 50 miles from your business location and thus incurred travel expenses these may be deductible. This includes air travel, hotel, taxi service, gratuities, and laundry costs.

Meals and Entertainment

For business meetings and travel the meals and entertainment costs may be deductible up to 50% of what is paid. Kepping a record of the topic discussed and names of people in attendance are a good idea . Also, since receipts tend to fade over time, it is also a good idea to re-write the date and amount of the bill on the receipt.

Business phone expense

In order to deduct business calls, the phone or cell phone plan needs to be listed with the name or the business. If the business is located in your home, only the 2nd phone is able to be claimed as used for business.

Other Expenses

This includes professional memberships (but not country club or gym memberships), training and education, subscriptions, books and publications, gifts of no more than $20 per person, and other miscellaneous expenses.