Self-Employed & Small Business Owners: Don’t Overlook These Tax Deductions & Credits

Posted March 18, 2010 in Uncategorized by

In Tuesday’s post, I shared some commonly overlooked tax deductions and credits. While writing the article, I realized that there are tons of deductions and credits available to small-business owners and self-employed people—enough to fill an entire column. So here it is!

Financial Expenses

As the saying goes, sometimes you have to spend money to make money. Those little expenses can add up—and they’re deductible. Remember to deduct:

  • Bank charges, including monthly fees and overdraft charges
  • Credit cards or PayPal fees
  • Get stiffed on a bill? Write it off as bad debt.

    Travel, Transportation & Entertaining

    You can deduct your professional travel-related expenses when traveling to a business meeting, conference or doing client development work. But don’t just think of "transportation" as getting on an airplane. You can even deduct the cost of driving across town and paying to park in a lot when traveling to meet a client.

    Doing business over coffee or a meal? You can deduct half of your business-related meal expenses.

    Outside Experts

    Many freelancers hire subcontractors to help with research or tasks where you lack particular expertise. The costs of subcontractors is a deductible expense. If you hire professional advisors, such as attorneys and accountants, for business purposes, you can deduct their fees.

    Technology

    The cost of your telephone and fax line can be deducted. However, if you work from home, you cannot deduct the cost of your first phone line—regardless of how it’s used—but can deduct the cost of additional phone lines. You can also deduct the business cellphone expenses as well as things like Skype fees.

    Don’t forget about any big-ticket technology purchases you made in 2009, including computers, printers, scanners and even websites. You can either deduct the full value of these assets in the year you purchased them, or you can deduct a portion of the cost of the item over the course of several years.

    Office Expenses

    Home office deductions can be tricky to calculate, and some worry that claiming a home office deduction may flag them for an IRS audit. Personally, I prefer to use tax preparation software that asks you questions to determine whether you’re eligible for a home office deduction, then collects the necessary data to calculate your deduction. If you are eligible, remember that you can deduct part of what you pay for:

    • Utilities, such as electricity and gas
    • Mortgage interest
    • Homeowner’s insurance or renter’s insurance
    • Home repairs that benefit your home office

    If you work out of an office that you rent, you’ll be able to deduct the rental costs.

    Don’t forget to deduct the cost of office supplies, such as paper, pens and toner.

    Insurance

    Insurance costs, including malpractice insurance, property & casualty insurance and business insurance, are all deductible.

    Self-employed people who pay for their own insurance can also deduct the cost of their health insurance premiums.

    Business Development

    Job hunting expenses have long been deductible, but if you’re a freelancer, this would include expenses you incur looking for temporary jobs and prospects. Be sure to expense the cost of subscriptions to job boards, freelance bidding sites and similar expenses.

    Deduct business-related conferences, books, magazine subscriptions and other research-related expenses related to your industry. And remember that advertising expenses—including phone book listings, web site development, graphic designer expenses—can all be deducted.

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