You’ve just wrapped up another successful year in business, and it’s time to file your taxes.
As you start sorting through your expenses, you suddenly realize that some of them seem a bit…unusual.
Can you really deduct that foam finger from the company picnic? And what about that trip to Vegas for the trade show? Surely those business lunches add up, right?
Then the infamous age-old question: what can you deduct on your business taxes?
The answer, my friend, is not always cut and dry.
While the IRS does provide some guidance on what types of expenses are deductible, there’s often a lot of room for interpretation.
What Can You Deduct On Your Business Taxes?
As it turns out, there are a number of items that can be deducted on business taxes – and they go far beyond the standard office supplies.
From the cost of travel to marketing expenses, to home office and equipment items all of which can be deducted.
For example, you can deduct the cost of business-related travel and entertainment, but there are restrictions on how much you can spend and what types of activities qualify.
So how do you know if your expenses will pass muster with the IRS?
According to the IRS, “you can deduct ordinary and necessary expenses incurred in carrying on a trade or business.”
But what exactly does that mean?
There are a few key things to keep in mind when it comes to deducting business expenses:
- The expenses must be “ordinary and necessary.” In other words, they must be common and accepted in your industry.
- The expenses must be incurred in order to carry on your business. Meaning they must be directly related to your business operations, and not personal or lifestyle expenses.
- You must be able to provide documentation for all of your expenses in the event that you are audited by the IRS. Which, let’s face it, nobody wants Uncle Sam breathing down their neck!
As a business owner, it’s important that you understand what deductions are available to you.
Keeping accurate records of all of your business expenditures will help to ensure that you’re able to take full advantage of all of the deductions that you are entitled to.
But before you start writing off that new pair of shoes as a “business expense,” be sure to consult with a tax professional to ensure that you’re applying for all the deductions available to your business.
By doing so, you can reduce your taxable income and save money on your taxes.
Have you claimed all of the deductions available to your business?
Looking for some clarity on tax deductions…contact me today!