some tax write-offs you may be missing!
Happy tax season, everyone!
Fun stuff, right? ;) Taxes are slightly exciting to me this year (about as exciting as they can get for me) since there’s a new 20% deduction simply for being a “pass-through” small business! Make sure to ask your accountant about this. Read more about it here.
Most of the deductions for your business may be obvious - thinks like investing in education, equipment, office supplies, website hosting, etc. But here are a few you may be missing that could save you thousands!
Chances are, you know that you should be writing off mileage, the real deduction lies in how closely you’re keeping an eye on it! Having an app automatically log your trips (every single time you drive) and a set day each week to “classify” these trips will save you so much money! A lot of people just look at their calendar at the end of the year and guess a bit with mileage. They’re most likely missing out on little trips to the post office or trips to buy equipment/get equipment serviced.
The key point here is to make sure you set aside one day a week to classify! I’ve gotten behind in the past and let me tell ya, it’s a) probably costing me a lot of money and 2) not fun to have to go through all of the trips!
2. Home Office and/or Studio Space
I’m sure you’ve thought of this one as well, but I’m going to go into other details with it! Figure out the percentage of square feet you’re using strictly for work (a closet with files, desk, etc.) based on the total square footage of your house. If you have a studio space, it’s obviously all used for work!
Once you have the percentage, look at things like:
You name it! Whatever you’re paying to keep that space up and running is a write-off. I download all of my utility payments, add up the number, and multiply it by the percentage of my house that my office space takes up.
3. Cell Phone
I don’t know about you, but I use my phone ALL the time for my business! Look at you, Instagram! Make sure you’re taking advantage of this write-off. Figure out the percentage that you use your phone for business vs. personal, add up the total amount you spent on your phone in the year, and write off the percentage of your total phone bills.
4. Credit Card Processing Fees
This is one of my biggest expenses each year! I’ve tried to find ways to avoid it, but it’s just a cost a modern business is going to have and I like to add the “convenience” to my client experience. If you’re using a CRM (Client Relationship Management) like HoneyBook or Dubsado, there’s most likely a way to easily find the total amount being taken out for card processing.
If you’re doing any type of work on your trips you can write a portion of the expenses off. Plan a shoot or photograph some content for your business/other businesses! And obviously if you’re traveling for a mastermind retreat or doing destination work, you can write those travel expenses off. Meals and entertainment is only a 50% deduction, though, even if you’re traveling.
6. SEP/Simple Retirement Plan
I wrote about this in my last blog post that we opened a SEP Plan this year for write-off purposes (a Simple Plan is also one to look into). With a SEP Plan, you’re able to contribute up to 25% of the employee’s income (you) as the “employer” and take a deduction on that each year.
Here’s how Motley Fool describes it. “A SEP is set up by an employer (including a self-employed person) and permits the employer (not the employee) to make contributions to the SEP-IRA accounts of eligible employees. The employer gets a tax deduction for contributions made, and the employee is not taxed on those contributions, though their eventual withdrawals will be taxed at their income tax rate. (Of course, a self-employed person is both employer and employee in this case, so he or she funds their own account.)”
7. Health Savings Plan
This is an account you contribute to throughout the year to use for health/medical expenses! Win/win for both you as an “employer” and as the “employee”. And always great to have money set aside when medical expenses come up.
8. Charitable Contributions
We give a portion of all of our profit away each year! Not because it’s a tax write-off but it is a nice bonus. :)
Forbes recommends to ask these two questions when deciding whether something can be written off or not.
Is this for business use?
Is it an ordinary (common and accepted in your industry) and necessary (helpful and appropriate for your trade or business) expense?
And finally, make sure to save all of your receipts and file them away for 7 years to be on the safe side. :)
What are some uncommon tax write-offs you use each year? Share in the comments!
Happy tax savings!