There are plenty of reasons to start your own small business, one of the smaller benefits though is that the IRS seems to favor small business owners, perhaps because of their roles as job creators, by allowing them to write off a number of different items on their taxes. Here’s a short list of our favorite write off’s for small business.
Like most deductions, you have a few options in play about how to calculate your deduction. The important thing to note is that you can deduct mileage, parking fees, bridge tolls (hey that’s important for me here in San Francisco) and even repairs, maintenance, insurance and much more!
Professional Publications and Software:
A few years ago the IRS only allowed you to write off subscriptions to trade publications and other items, like they were computers or other hardware, over the course of 3 years. These days any professional publications that you subscribe to can be written off in a single year in the same way that you handle a magazine subscription. Financially it might not be much different, but it helps in terms record keeping to be sure.
Business Travel and Entertainment:
Every accountant that you talk to, is going to tell you the same thing in regard to business travel, you had better keep excellent records. Evidently for years the IRS looked the other way as people took personal trips and then expensed them to their business. No longer. Meals on these trips count as entertainment and are deductible, but only at 50% of their initial value. Still, that’s a good deal especially if you can combine some personal time on your business trips, much as I do when I take trips to source wine for my wine club.
The nice part of insurance, the entire amount of the insurance is deductible. That’s a straight expense and one that we’re happy to see our business pay on a monthly basis.
Home Office Deduction:
The home office deduction is about the most troublesome on this list since it’s so valuable, but so few people actually qualify for it. Let’s start with the basics, you can only claim the deduction if the area of your home is only used for business use. If it is, then you claim your internet fees, phone bill and most importantly a portion of your rent or mortgage as a deduction. In my case, I claim about 100 square feet of my home as a business address (the IRS doesn’t complain since my address carries one of my alcohol permits) and therefore can write off a portion of my mortgage as a business expense. It’s a huge value on a yearly basis here in California and one that I’d be incredibly upset to lose. The value of the deduction is so good that I’ve long considered building a small office in the back of our yard to make sure we continue to qualify for the deduction as our family expands.
I hope you’ve enjoyed this short list of business tax deductions. Tax season is ongoing for any small business year around and I hope you’ll take this opportunity to get some real tax help if you need it!
Mark Aselstine is the owner of Uncorked Ventures, an online wine club based out of San Francisco. The high cost of living makes his tax deductions so much more important to him.