As the end of the year is quickly approaching, it’s time to start filing your tax returns. While I know this can be a mind-numbing process of understanding legal jargon and organizing documents, it’s also an opportunity to get a serious return on what you’ve invested in your business.
No matter if you’re a tax veteran or novice, as laws change, so do the savings you could potentially receive. And while I’ll note that hiring an accountant will always be your safest bet, there are a few strategies you should start keeping up with to maximize your return. Check them out below:
If you consider your office your bedroom, then there are actually some pretty great tax write-offs to keep in mind. While it can get tricky calculating the amount of your home or apartment that is used for business in comparison to how much you pay for your rent/mortgage, the overall improvements you make to these areas can be deducted as well.
For example, if you decided to make your home more energy efficient, then a portion of that can be considered a business expense. Additionally, improvements made for efficiency can be written off as tax credits on their own as well, which you should consult with an accountant on the specifics of how much. Overall, this strategy can not only help improve where you live but be an excellent consideration for taxes as well.
As long as a trip is related to business, then writing off the mileage is a no-brainer. With mileage, the IRS allows doing one of two things. The first is the standard mileage deduction, which is 53.5 cents per mile. This includes the depreciation of the vehicle, as well as any potential maintenance or gas. The second option is actual expenses, which is any repairs you had to make. This choice, however, doesn’t allow you to accumulate miles, so depending on how much you have to drive for work, could be the more advantageous. Finally, if you’re looking for a solution to keep track of all of this, then I highly suggest looking into something like Trip Log Mileage– an app that automates your mileage reports.
Any Services Related To Your Business
Whether it be software to help with your accounting or an internet bill, any service that you purchase can be written off. While that might sound ambiguous, you’d be surprised at how many things you already pay for that can be included with your personal business’s taxes. For example, as Intuit notes, if you use your cell phone 30 percent of the time for business, then you’re allowed to write off that percentage. Granted, little things may not seem like much, but when you add them up as a whole amongst all the services you use, it can add up much quicker
than you’d think.
Make a list of everything that you purchase somewhat related to your business. Even down to things like your electricity bill or hiring a Comcast technician to fix your internet could be accounted for. After all, if you’re already paying for it, then inquiring about writing it off could never hurt.
No matter if you file as self-employed or a registered LLC, there are significant tax benefits you could receive for paying health insurance. On average, these can be as much as $390 per year, which is deducted from your gross income. This strategy helps ease the burden on something already required to be purchased, which is a great easement on your final bill.
Any Equipment You Buy
As you may already be familiar, any equipment you purchase for your business can be written off to the IRS. As PC World notes, there are two types of equipment write-offs you could have: one in a lump sum, or as a depreciating asset. For the latter, this can be done on a gradual scale. For example, if I buy a computer for $2,000 and count it as a depreciating asset for five years, then I would write off $400 per year.
Beyond just major purchases, even putting down things like pens, notebooks, or a calculator could be included in your assets. These items, while small, add up to a number that you report as the grand total, which could be a tremendous amount off.
As taxes are an inevitable part of everyone’s income, what are some write-offs that you’ve used for your home business? Comment with your insights