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Top 10 Tax Write-Offs for Small Business Owners

Top 10 Tax Write-Offs for Small Business Owners

As a small business owner, tax season can be a stressful time. With all of those forms to mail to employees, expenses to track, and checks to write to the IRS, no-one could blame you for dreading the month of April. But beneath the bureaucratic onslaught, there is one shining beacon of hope: deductions, deductions, deductions. For the small business owner, deductions are a world of plenty.

Like everything to do with the IRS, the rules around deductions can be nuanced, so it’s important to do your research, talk with an accountant, and use a good tax calendar to stay on track of regulations and deadlines. Advises Austin-based Certified Public Accountant, David Coffman, “Make sure to keep good detailed records supporting your deductions for at least 6 years, and fill out the proper forms correctly and completely.”

Here are just a few deductions you won’t want to miss:

1. Travel Expenses

Rest assured that when you stay overnight at a hotel while conducting business away from home, that night will be fully tax-deductible. In fact, every night you spend away for business purposes will also be deductible, as will 50% of any meals you eat out (with or without a client in tow), any rental cars and plane tickets, and sometimes even transcription or translation services while traveling abroad.

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Thinking of extending your stay for a little vacation time? As long as the purpose of your trip is mainly for business, you can still deduct your travel costs to and from the destination. “However,” Coffman cautions, “expenses specific to the personal portion are not deductible.”

No matter what, just make sure to keep good track of your receipts regardless of the total (yes, even if it’s below $75).

2. Auto Expenses

Do you use your car for business? Do you own a company car? Some of the costs associated with gassing up and maintaining that car will be deductible. For 2012, you’ll be able to deduct 55.5 cents per each mile driven, as well as all business-related tolls and parking fees. Don’t just eyeball this, especially if you only own one car—it’s a red flag for IRS eyes. Keep track of the exact miles you drive, enter them into your accounting system or hand them to your bookkeeper, and include a detailed description for each recording.

3. Current and Capitalized Expenses

It’s easy to confuse current and capital expenses, so it’s worth defining them separately. Current expenses are things like rent and electricity bills—those ongoing costs that keep both your office and your business up and running. Capitalized expenses, on the other hand, are expenditures like equipment and vehicles. Current expenses are simply deducted from your business’ yearly gross income, while capitalized expenses must be deducted over a number of years. A general rule of thumb is this: if an item has a shelf life of longer than one year, it’s capitalized. That being said, many items such as office supplies and repairs can be deducted as current business expenses, but only after your business has opened its doors. Before that, they’ll be capitalized. Confusing? Maybe, but understanding these distinctions and filing accordingly will be well worth the effort in the end.

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4. Software and Subscriptions

Once upon a time, businesses looking for deductions in the area of software and subscriptions had to depreciate the cost of computer software over three years; see current vs. capitalized expenses. Now, however, computer and software expenses can be cited as expenses up front using the Section 179 election, just like magazine subscriptions.

5. Health Care Costs

Though exact amounts and procedures will differ based on the type of business filing you have, many health care costs are deductible for small business owners. For proprietorships, health insurance premiums are 100 percent deductible on Form 1040 as an adjustment to income, though that deduction can’t be more than your business’ net profit, and the deduction is void if you’re eligible for any other kind of health coverage—including those of your employed spouse. However, if your spouse worked for your business, then his or her premiums are also fully deductible.

Things will be a little different if you’re filed as a C-Corporation. In this case: “Health care costs, including out of pocket expenses, are deductible as a business expense under a health reimbursement arrangement,” says Coffman. You’ll want to contact accountant to get this set up at least in your initial year as a C-Corporation.

6. Bad Debts

It’s never any fun when a client doesn’t pay or a vendor doesn’t deliver, but if you’ve got a bad debt on your rolls, it may be deductible, but only for accrual basis rather than cash basis taxpayers (learn the difference here). Says Coffman, “If an accrual basis taxpayer has billed for his goods and services, he may write off as a bad debt any amounts not collected. A cash basis taxpayer may not write off uncollected fees for services or goods, but may write off the cost of the goods that were not paid for.”

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Unfortunately, this applies only to goods, not to services, which are a lot more difficult to quantify. Alas, you truly cannot recover lost time.

7. Home Office Deductions

Home office deductions are popular among small business people. If you work from home, you can deduct for depreciation, utilities, insurance premiums, mortgage interest and repairs. However, the deduction counts only for that space, and you must use the area regularly and exclusively for business. If you think this is a good excuse to get a break for all of that yard landscaping you’ve been paying for, think again: the rules around this deduction are strict, and it is often a trigger for audits, so learn them well before filing incorrectly.

8. Business and Professional Fees

If you’ve bought business books, paid any fees to lawyers, tax professionals and more, and their service is clearly related to this year’s activities, these all qualify as deductions. However, if these fees relate to future years, they’ll need to be deducted over the life of the benefit they provide.

9. Retirement Contributions

If you’re self-employed and contribute to a SEP-IRA or Keogh, these can all be deducted on your personal income tax return.

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Adds Coffman, “This is one of the few areas where you can claim a deduction in the current year for amounts paid in a later year. You get to see the effect of the deduction before you actually commit to it. Some plans, however, must at least be established prior to the end of the year.”

10. Phone Calls

Business-related phone calls are fully deductible, even if you conduct them on your personal cell phone or home phone. As with mileage, you just have to keep good records that separate the business calls from the personal ones. A good way to do this is to circle business calls and write a description on your bills, total them up and keep a copy to be added into your final returns. If you add a second line or buy a cell phone that’s dedicated primarily to business, you’ll be able to fully deduct any regular fees and charges associated with the line.

Take-Away

When tax season comes around, there’s a lot for small business owners to think about, and just as many deductions to benefit from as well. Do your research, keep abreast of the latest regulations, and contact a good accountant early in the year to get it done right. Don’t wait until the last minute, or you may miss out!

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Last Updated on September 20, 2018

How to Be Happy at Work and Find Fulfillment in Your Career

How to Be Happy at Work and Find Fulfillment in Your Career

If you’re going to spend 1/3 of our life at work, you should enjoy it, right?

Trust me, I know that’s easier said than done. Difficult coworkers, less-than-desirable tasks, or even just being in the wrong position can all lead to a lack of enjoyment and fulfillment in your work.

But what if I told you it doesn’t have to be this way? Or better yet, if you struggle with all of the above (and then some), what if I told you that enjoying your work and finding fulfillment regardless of those obstacles is possible?

Don’t believe me? I don’t blame you because I was there too. Before implementing the tips below, I struggled to get through each day, much less find real fulfillment, in the office. Now, even after the toughest days on the job, I still come away with feelings of pride, accomplishment, and fulfillment. The best news is, so can you.

If you’re ready to make those hours count and find happiness and fulfillment in the office, then read on to find out how to be happy at work and find fulfillment in your career:

1. Discover the root(s) of the problem

For this first step, we’ll need to think back to 8th-grade physics (humor me). We all know Newton’s 3rd law, “for every action, there is an equal and opposite reaction.” When you think about it, the same can be said outside of physics, and we see this law play out in our daily lives, day after day.

Simply put, all the issues we deal with in the office (and life in general) affect us in a noticeable way.

If you’re appreciated at work, like the work you do and receive frequent praise, promotions, or raises, then this will probably have an altogether positive effect on your life in the office.

But what if we reverse this? What if you feel under appreciated, get passed up for promotions, or get denied raises? This is sure to affect the way you feel at work on a negative level.

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So, before you can implement the steps of feeling happy and fulfilled at work, we first have to discover the reasons why you don’t feel that way already.

Think about it, write a list, or make a mental note. Run through all the reasons you’re dissatisfied in the office, and don’t hold back. Knowing the exact obstacles you’re facing will make overcoming them that much easier.

In fact, as a side-challenge to this article, I recommend picking the top three reasons contributing to your dissatisfaction at work and using the following tips to tackle them.

2. Practice gratitude for an instant uplift

Did you know the simple act of feeling grateful can increase your happiness and make you more fulfilled at work?[1]

Well, it’s true, and it’s scientifically proven.

Dr. Lisa Firestone notes that practicing gratitude “reminds us of what we lacked in the past.” Meaning, it serves as both a boost to happiness and a bit of a wake-up call that things have been or could be, much worse.

Trying to conjure up feelings of gratitude can seem almost impossible when your work situation seems bleak, but hear me out: There are incredibly easy ways to get started and it doesn’t involve trying to “force” yourself to feel grateful about things that stress you out.

For an instant pick-me-up, try this:

Find a loose piece of paper, a blank sticky note, or anything you can write on, be it physical or digital. List just three things that you are absolutely without-a-doubt thankful for in your life.

Now here’s the trick: Don’t just list what you’re grateful for, you have to list why you’re grateful for them, too.

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For example, simply saying “I’m grateful for my kids” will probably make you feel good, sure, but what if we could amplify the warm, fuzzy feeling into real, lasting motivation?

Instead, write the reason you’re so thankful for your children. Is it because they make you laugh and forget about other stressors? Or maybe they help to remind you of why you go to work every day in the first place?

Whatever your reasons may be, jot them down and keep your list somewhere you can see it while you work. A quick glance at your gratitude list throughout the day can provide powerful, positive motivation to keep going.

Bonus:

If you can find just three things to be thankful for that specifically relate to your job, and list why those things make you grateful, your list can also help you find fulfillment in your work itself which can give you an even bigger boost of positivity throughout the day.

3. Take meaningful time for yourself

We all know creating a strong work-life balance can be crucial to feeling satisfied in our jobs, but rarely do we ever address how we’re spending our time outside of work.

Many of us survive a 9-hour work day and commute home only to find ourselves busy with our personal to-do lists, running a household, and taking care of a child (or 2 or 3, and so on).

If you spend all your time working, whether in the office or within your household, you’re going to feel drained at some point. This is why setting meaningful time for yourself every day is highly important.

Look, I get it: I don’t know anyone in the working world who can shun all responsibility for a 3-movie marathon or happy hour with friends whenever they feel like it. But finding time for yourself, be it just 30 minutes to an hour, can really make a difference in how you feel at work.

This works because you’ll have time to actually relax and let the day’s stress melt away while you enjoy something just for you. The to-do lists and stressors will still be there after you’re refreshed and ready to tackle them.

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No time for me-time? Try this:

If you have a busy household, you’ll need to capitalize on a block of time you know will be completely uninterrupted. The easiest way to do this: try waking up 30 minutes to an hour earlier than usual (or push bedtime back an hour if you’re a night owl, like me) and take time to do something you enjoy.

This could be reading with a cup of tea, catching up on Facebook, spending time on a passion project—anything! As long as it’s meaningful to you, it works!

Bonus:

Starting your day with meaningful time for yourself can set you up to have a positive mood that lasts well into office hours, and having your me-time in the evening can give you something positive to look forward to during the day.

4. Get productive and feel accomplished

Don’t you just love the feeling of checking the last item off of a hefty to-do list? That’s because self-motivation can be a huge driver of positivity and success.

When we accomplish something, no matter how small, it makes us feel good, plain and simple. Applying this tactic to your daily work can be the motivator you need to find fulfillment during the daily office grind.

While there are tons of steps to get more done at work, I’ll share my personal favorite: Prioritizing.

Now, many people handle prioritizing differently. Some like to tackle the little tasks first so they can spend focused time on the big to-dos. Others like to knock out the big items first and get to the smaller ones when they can.

No matter which camp you’re in, you may be missing one crucial step: Time management.

So how’s this work? When you factor in the amount of time your priorities will take, it can transform your productivity ten-fold.

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Say you have three top priorities for the day. You might jump into the smaller ones or the bigger ones depending on your preferred method, and then find yourself out of time and bringing work home with you at the end of the day.

This is prevented when you factor in time. Knowing how long each item will take, or deliberately setting specific blocks of time for your priorities can help you accomplish more in the same 8-9 (or 12) hours that you typically spend at work.

Try this:

Take a look at your priorities and consider how long they should take. Pop into your Google calendar (or Filofax, whatever works for you) and schedule time to work on your priority items around any important meetings or events of the day.

The most important thing to remember is to stick to your dedicated time.

Often, when we know exactly how long we have to work on something (and honor this time limit), we’re motivated to get more done on time to avoid taking work home at the end of the day.

The bottom line

There’s no need to waste 1/3 of our lives feeling unsatisfied at work. Luckily, you now have the tools to get started, take back your time, and become happy and fulfilled at work again.

The only question is — which tip will you try first?

Featured photo credit: Ellyot via unsplash.com

Reference

[1]Psychology Today: The Healing Power of Gratitude

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