Contrary to popular belief, what you don't know can hurt you, especially when it comes to tax deductions you may have missed for your business. Failing to capitalize on all of the tax deductions you may be entitled to is synonymous with leaving the proverbial "money on the table." However, making sure you have maximized every tax deduction available is easier said than done —unless you have year-round tax planning with an experienced accountant or CPA.
At the MB Group, we are a team of seasoned tax accountants and CPAs who specialize in helping businesses maximize their tax deductions. Through the years, we've helped business owners across virtually all industries create competitive advantages with strategic tax planning and financial planning.
To help you avoid leaving money on the table, we've outlined some of the most costly but commonly missed tax deductions by business owners. Continue reading to learn more and don't hesitate to reach out to the pros at MB Group for specialized tax planning and financial planning solutions.
Automobile Deductions You May Miss
Do you use your vehicle for business purposes? If so, you may be eligible to deduct expenses associated with the use of your vehicle. For instance, this includes driving:
- To and from client meetings
- To and from work locations
- Transportation to business meetings
- And more
You have one of two ways to deduct the mileage associated with business travel: actual expenses vs standard deduction. To determine which method is best, it's critical to record all expenses. You should be capable of proving the cost of automobile expenses, the mileage for each use, the date you began using the vehicle for business, and the total miles for the entire year. At the same time, make sure you keep excellent financial records pertaining to the purpose of each business trip and business destination. While taking the standard deduction for business trips is the easiest way to write off car expenses, you could be leaving money on the table.
The Home Office Deduction
Whether you are a freelance writer or have started your own business, you may be eligible to take a tax break for your home office and the associated expenses. In fact, owning a home can provide you with a significant tax write-off. The home office deduction allows you to write a percentage of your home-related expenses. However, most people don't know there are direct home office expenses that may be 100% deductible.
Direct Home Office Expenses Are 100% Deductible
Direct home office expenses are those that are related solely to your home office. This means these expenses are not associated with other areas of your personal living space or home. Because these expenses are associated only with your home office, you may be able to write off the whole amount. For example:
- If you purchase office decor and furniture, you may be able to write it off.
- You may be able to write off maintenance costs associated with your home office, such as hiring a cleaning service.
- If you made repairs to your home office, such as installing new light fixtures, re-flooring, painting, patching walls, etc.
The key to using this deduction is for the expenses to be only related to the office space—not the living space. For clarity, if you hire someone to refloor your entire home, it will only be partially deductible because non-business areas were impacted. However, if you hire someone to just refloor the office, it will be 100% deductible.
Educational Expenses Are Deductible
Did you know that you may be able to deduct any training or educational workshops you attend that contribute to running your business? This includes:
- Online classes
- Mastermind groups
- Other reference materials
However, for an educational expense to be deductible, it has to be related to your business. If you're on the fence about whether it's related to your business, ask yourself if the session would:
- Help me understand my customers better
- Bolster a skill I already have
- Help me more effectively run my business
- Give me a new set of skills that can enhance my business offering
Freelancers and Contract Labor
Many independent contractors, sole proprietors, and small business owners turn to freelancers and other contractors to meet short-term and long-term business needs. But did you know the cost of contract labor is deductible? Make sure you issue Form 1099-MISC to any contractor that you pay $600 or more in the year, and you may be able to deduct the payments.
Do you run an advert in a local circular? Are you using Facebook paid ads or Google AdWords to generate traffic to your website? If so, you may be able to fully deduct these marketing and advertising expenses on your tax return, regardless of the vehicle you use. Many expenses associated with marketing will fall under the tax-deductible "advertising expense."
Turn Your Tax Planning into a Strategic Advantage with MB Group
We get it—tax planning is tough and making sure you maximize every possible tax deduction available to your business can be tougher, especially if you're attempting to do it alone. Fortunately, you don't have to. At the MB Group, you have access to an entire team of experienced CPAs and tax planning professionals. We'll work closely with you to maximize your tax deductions and create a competitive advantage.
Contact the MB Group today to learn more about leveraging strategic tax planning for growth.