Maximizing Write-Offs: A List You Have to Have!
Once small business owners find out that I am a CPA, the question I always get is: “So what’s a write-off?” Well, unfortunately, there isn’t a magical list in the Internal Revenue Code, or even created by the IRS. Although, there is the tax principle set forth in IRS Code Section 62 that states: “A valid write-off is any expense incurred in the production of income.”
Why Focus on Write-offs
Legitimate tax write-offs can help you reduce the amount of income you pay tax on, and ultimately the total amount of tax you pay. However, there are some actions that you as a business owner must do to help you maximize your deductions and thousands of dollars a year and much more over a lifetime.
A Real-Life Example
A good CPA teaches their clients to think above the line. That line is your Adjusted Gross Income or AGI. As a matter of fact, that number is included right on your tax return. What I mean by thinking above this line is constantly trying to think of any and all personal expenses that may have a business purpose.
Using myself as an example, for years I worked in Corporate America making a w2 salary. In 2017, I decided to become a realtor as real estate is a passion/hobby of mine. Yes, real estate agents are business owners. During that year, items like the use of my vehicle and cell phone moved from being personal use to business use, giving me write-offs.
So many Americans just pay taxes, then pay for every one of their personal expenses “after taxes.” Those with great wealth in this country do not do this. With a small business venture and included on your tax return, you can regularly succeed at converting personal expenses to business expenses.
The Seasoned Small Business Owner
Seasoned business owners over the years get proficient at keeping good records and thinking of a business purpose for many of their expenses. Ultimately, they have changed their behavior. They have become entrepreneurs and use that mentality in all their purchases. This is what I want for all my small business owners as I have fallen in love with this approach to purchases and saving money. After all, a penny saved is a penny earned.
The List
So, with all of that said, here is a quick list. Remember, it’s just a start, and not every one of these items is always a deduction. It can depend on the character of your business and the overall approach to designing your tax return. Nevertheless, try to track every expense you can and go over them with your CPA at the end of the year.
All necessary business expenses | Furniture and fixtures |
Accounting fees | Gifts (within limits) |
Advertising | Group insurance (if qualifying) |
Amortization | Health insurance |
Annual meetings | Home office |
Interest | Lobbying (if qualifying) |
Internet hosting and services | Magazines |
Investment advice and fees | Management fees |
Laundry while traveling | Materials |
License fees | Maintenance |
Attorney’s fees Auto expenses | Medical expenses (with plan) |
Bad debts (if previously income) | Membership dues |
Banking fees | Moving |
Board meetings | Newspapers |
Building repairs and maintenance | Office supplies and expenses |
Cafeteria plan (requires plan) | Outside services |
Casualty damages | Payroll taxes for employees |
Charitable deductions | Parking |
Childcare (requires plan) | Pension plans |
Cleaning/janitorial | Periodicals |
Collection expenses | Postage |
Commissions to outside parties | Publicity |
Computers and tech supplies | Prizes for contests |
Consulting fees | Real estate related expenses |
Continuing education | Rebates on sales |
Conventions and trade shows | Rent |
Cost of goods sold (if have inventory) | Repairs |
Depletion | Research and development |
Depreciation | Retirement plans |
Dining | Royalties |
Discounts to customers | Safe-deposit box |
Dues (professional or club) | Safe Storage rental |
Education asst. (requires plan) | Subcontractors |
Embezzlement losses | Taxes |
Employees | Theft |
Entertainment | Telephone |
Equipment | Tolls Travel |
Exhibits for publicity | Unemployment compensation |
Family members on payroll | Utilities |
Freight or shipping costs | Website design |
Workers Compensation |
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