Guys, it's tax season. This can be a really intimidating time of year for small business owners and those who are self employed. Taxes can be confusing, not to mention expensive. As our company has grown over the years I've learned a lot about keeping track of our books. We also receive lots of help and advice from our accountant (and friend), Jason, who helped compile information for this post with me. If you're getting ready to do your taxes here are 10 tax deductions you ought to consider.
1. Vehicle Use. Do you use your car for work purposes? Did you know you can deduct the business use of your vehicle? There are two methods for calculating the use of your vehicle, you can learn more about it here. In our opinion the simplest solution is to keep a log of your work related mileage (either with excel or an app). Also save any receipts from tolls or parking fees, but file them as an expense (business travel expenses can be deducted as well).
2. Office Use. Do you rent a space that you use as an office or studio? If you have a designated home office space you may be able to write off a portion of your mortgage or rent. There are a few rules about deducting the use of a home office, namely that you must use it regularly. You can read more about this option here.
3. Business/Office Supplies. Chances are you bought all sort of things last year that you needed in order to conduct business. This might include the following: a computer, a camera, a printer, printer supplies, pens and pencils, software, postage, apps, online fees for web hosting or blog platform fees. It is best to keep a record of these expenses throughout the year, saving receipts in an organized fashion in case you ever get audited. This may seem like a pain at first but it's worth it, trust me. Also, more expensive items that you will use over the course of several years (like a computer or digital camera) will need to be depreciated over several years. A tax pro can help you with this step, just save those receipts!4. Education. It costs money to get an education, and the IRS allows some tax deductions in this area. You'll need a record of your tuition, fees or student loans. Read more about educational tax deductions here.
5. Insurance. If you are self employed chances are you pay your own health care premiums. These are tax deductible. If you own a small business and have any kind of business insurance, these premiums may be deductible as well as renter's insurance for a rented office space or car insurance on a company car.
6. Advertising and Promotions. Do you have costs associated with advertising your business or product? Do you send out mailers? Do you utilize an email marketing service? These costs can be tax deductible so long as it does promote your business, and you have some documentation of the transactions.
7. Banking fees. This one's often easily overlooked. If you pay lots of fees associated with your bank or Paypal. Keep track of them, as they can be deducted.
8. Retirement Plans. If you are an employer most of the time you can deduct employer contributions on behalf of an employee. If you are self employed (the recipient/employee) then this can become more complicated as there are more rules regarding if you can deduct funds to a retirement account. Check with your tax pro for more information.
9. Tax Preparation. Ok, full disclosure, I'm peppering this one with my personal opinion. If you are a small business owner or self employed I HIGHLY recommend getting your taxes done by a tax professional you use over the course of many years. Yes, you can deduct the fees associated with this service the following year (for personal taxes there is a limit to the amount you can deduct). But even more important than this I've found that having a second person with more knowledge and experience take a look at your receipts/books is the number one thing you can do to save money during tax season.
10. Moving Costs. This won't apply to everyone, only those who move for work related reasons. And there are limitations. Be sure you know what address is your tax home. You must move at least 50 miles. You must be there (the new, moved-to area) for at least 39 weeks during the first year of employment (or 78 weeks during the first two years if self employed).
If you've got your own venture that's spending and making money, it's never too early to start thinking about taxes. Create habits. Save receipts. Always try to learn more about the system. It will be so beneficial in the longrun. And don't be discouraged if you didn't do everything absolutely perfect last year. Being a good small business owner is a learning process. We are always learning new and better ways to do business every single year. You can do it! xo. Emma
Credits // Author: Emma Chapman, Photography: Elsie Larson. This post was written with considerable assistance from our accountant Jason Jordan. Resources linked throughout.