Blog

Taxes are an unavoidable part of life. As a business owner, you don’t have the luxury of having withholding’s done for you by an employer. You are responsible for reporting and remitting your taxes. Which can be a daunting process. If you own your own business, your income is subject to income tax and state and local taxes. However, one silver lining that can make taxes a little more bearable is Tax deductions. Tax deductions work to lower your taxable income, therefore lowering your tax liability. If positioned correctly with a comprehensive tax plan, you can lower your taxable income to zero with deductions.

No Deductions Left Behind – Commonly Missed Deductions

Tax deductions are a taxpayer’s saving grace, however they do no good if left unclaimed. Which is why we hope to shed a little light on commonly missed tax deductions so that you can benefit from all of the tax savings you qualify for. Here are the most commonly missed tax deductions you may have not been aware of:

Business Expenses

Owning a business comes with certain business expenses, many of which qualify as deductible expenses. Some of these business expenses often get overlooked when it comes to deductions. Some commonly missed business deductions include:

  • Petty Cash – You may not think about it at the time, but those petty cash purchases can add up. And since they are a business related expense they can be deducted. Be sure to keep accurate records of all expenses, and save your receipts!
  • Preparation of Documents – If you are seeking out a loan for your business, you may need to prepare a business plan and present financial data. If you enlist the guidance of a professional consultant, attorney, or accountant their consultant fees are considered a deductible business expense.
  • Research and Development – The cost of researching and developing and be deductible as long as they aren’t listed as long term expenses. These expenses can be deducted over one year or spread out over time. You may also qualify for the R&D tax credit, depending on the nature of your research.
  • Startup Costs – You may be able to deduct up to business start up costs up to $5,000 and organizational costs up to $5,000. This could include professional fees, travel expenses, phone expenses, etc. Be sure to keep accurate records of your expenses.
  • Losses on Debts – If you have invoices that haven’t been paid by customers, or other bad debts that you have not been able to collect after making a valiant attempt, these can be deducted. Bad debt isn’t necessarily a total wash, then can end up helping your tax situation in the end. Bad debt deductions can only be claimed if the amount owed to your was claimed in your gross income.

Home Ownership Expenses

Many taxpayers know they can deduct mortgage interest, but did you know that you can also deduct private mortgage insurance (PMI) and the points paid when you purchased your home? In addition you can deduct:

  • A portion of your annual utilities. This can include water, electric, and gas — anything you use in part for your business can be deducted, including internet.  
  • Property taxes. Under the new tax laws, you can only deduct State and Local taxes (SALT) including state income taxes and property tax up to the cap of $10,000. That has left a lot of unused local taxes paid. However, you can deduct property taxes on your business, under business-use-of-home rules, which does not affect the $10,000 cap. This means that you’re able to spread local taxes between your itemized deduction and your business deductions.
  • Deprecation. Current tax rules allow you to include a portion of your home’s purchase price, in depreciation. We don’t cover deprecation in detail here, but just note to look into it as a worthwhile deduction.


commonly missed tax deductions
Image Credit: Realtor.com

Purchasing a Car

When you purchase a car, you pay sales tax and some states charge you an annual tax to drive in their state. These taxes can be deducted under your SALT deductions. However, keep in mind the limit of $10,000 per year.

Medical Expenses

If you have medical expenses that exceed 10% of your AGI, you can deduct the portion that exceed your AGI. However, if your insurance company reimburses you, these expenses cannot be deducted. This includes co-pays, prescriptions, lab tests, therapy, nursing fees, and even transportation costs like riding the bus or mileage up to $0.18 per mile. In addition if you pay for a long term care policy that is not employer sponsored, these costs can also qualify as a tax deduction.

commonly missed tax deductions
Image Credit: 50 Plus Finance, https://bit.ly/2IXEVVQ

Costs Associated With Charitable Donations

If you decide to donate a big ticket item, and an appraisal is involved. The cost of the appraisal is tax deductible. In addition, if you donate your time, the costs associated with transportation can be deducted. This is includes bus fares, mileage of up to $0.14 per mile, tolls, and parking fees. Be sure to have a good system in place more mileage tracking and keep all receipts.

What Can You Do About Missed Deductions

If you feel that you have missed some of the commonly missed tax deductions above, it isn’t too late. You can always amend your tax return. You have 3 years from the original file date to amend a tax return. You may find that you can save more money by amending a tax return. Talk to your tax professional to learn more about amending your tax return.

Never Miss Another Deduction

Knowing which deductions apply to your situation is important. Unfortunately the tax code is constantly changing, so staying on top of the current laws can prove challenging. Working with a tax professional and triangulating your views between your advisor and your team is the best way to ensure the best tax strategy and that you’re not leaving any deduction on the table. In addition, keeping accurate records and having a good accounting system in place can help you stay organized and help you prepare for taxes. To learn more about commonly missed tax deductions and other tax related topics subscribe to our newsletter.

This image has an empty alt attribute; its file name is button-9.png

 
 
 
 


Related Articles

Digital Advertising – What You Need to Know About California Sales Tax

7 Must Know Tax Planning Tips For Digital Marketers

Stop Doing Your Own Accounting – Tax Hacks


Book your session now!

Still looking to save $1,000's on taxes?

Join our mailing list to receive the latest pro tips on tax and accounting. 

You have Successfully Subscribed!