As the end of the year draws to a close, taxes may be the last thing on your mind.
However, filing season is just around the corner in the US and I think you should know about some tax deductions you might be missing out on as a business owner.
- Home Office Deduction – In years past there has been a taboo about claiming a home office deduction. However, in 2013 the IRS introduced a new way of claiming this deduction called the “Safe Harbor” Office in Home deduction. This allows self-employed individuals to deduct $5 per square foot of space in your home use exclusively for business use. The key word here is exclusive, it cannot be your kitchen table or bedroom that you work out of. It can be a corner of a room that you only use for business purposes, but you need to be able to prove the exclusivity of the space.
- Business Mileage – Often if we are working from home, we are also traveling to meetings, local events, or co-working spaces for business purpose. You can now use apps like MileIQ (https://www.mileiq.com/) to track these business miles and claim them on your tax return. The new standard mileage rate for 2016 will be 54cents a mile (that can add up quickly). To claim this deduction you need to record the starting and ending mileage for the year on your car, total miles for each business trip, reason for trip. Most apps do much of this for you. If you put a lot of miles on your car then you can purchase a product like Automatic (https://www.automatic.com) that actually plugs into your car and records all your driving data.
- Credit Card Processing Fees – If you accept Credit Cards or PayPal then you can deduct all the fees associated with their services. Just make sure that you actually are claiming the total income you received (how much was invoiced) and not the amount the company deposits into your account (usually after fees are taken out)
- Credit Card and Loan Interest – If you have a dedicated business credit card or took out a small business loan then you can deduct the amount in interest you paid over the calendar year. This doesn’t work if you bought a few business things with a personal credit card.
- Health Insurance Premiums – If you are Self-employed and paid health insurance premiums for yourself, spouse, or dependents; these are a deduction on your tax return.
Want some guidance on getting more organized for tax time? Download my Free Guide to Reducing Tax Time Stress.
Hello there, I’m Melissa Whaley, owner of Whaley Bookkeeping. I specialize in virtual bookkeeping and tax preparation for entrepreneurs. It excites me to help people understand and take control of their finances, especially in their businesses. I believe that anyone is capable of success if their passions are accompanied with the right tools. I love working with new business owners to help them set-up systems that will take the stress out their finances.
I am a licensed tax preparer in the state of California and have been helping small business owners since 2009. I am a Wave Accounting Pro, Quickbooks Online ProAdvisor, and Freshbooks Bookkeeper.
You will often find me drinking a cup of coffee while hanging out in Facebook Groups, or on my YouTube channel making videos to help Etsy sellers with their bookkeeping. In my personal life I am married to a wonderful husband, have a 6 year old daughter and a 1 year old son.