![]() Showing your clients a good time can be part of your job, especially if you're looking to build relationships and discuss business prospects. Retirement Plan DeductionsĪ SEP IRA is an ideal way for business owners to sock away money in a retirement account and deduct the contribution from their taxable income. In addition, the fees associated with maintaining and running your website, advertising yourself online, or even sponsoring your local middle school softball team are all tax deductible since they're considered the "cost" of advertising your goods and services. If you're a startup ready to print your first batch of business cards, announce a promotion, or launch an advertising campaign, all your expenses are tax deductible. The same applies if you take out a loan to help fund your company. If your business uses credit to finance purchases, the interest charges are fully tax deductible. This is especially true when dealing with a high-interest rate environment. ![]() Interest payments and bank fees can take a huge chunk of a business's revenue. If medical expenses add up to more than 7.5% of your adjusted gross income, then you can deduct anything over that amount. One way to save is by tallying up the cost of your health plan, co-pays, deductibles, and any other fees related to medical needs, including medicines. Medical expenses are going up every year. You can also count your vehicle as a business asset and deduct the depreciation value. If you use your vehicle for business purposes, you can deduct your auto expenses, including miles driven. The same applies to professional fees, including tax preparation services. The good news is that legal fees related to the operation of a business are tax deductible. Whether it's for a consultation, to draft a contract, or to prevent or defend against a lawsuit, lawyer fees can add up quickly. The IRS allows you to deduct half of the self-employment tax (7.65%) on your income taxes, therefore reducing your tax liability. ![]() Sole proprietors and LLCs with only one owner pay the full amount of self-employment tax, which is 12.4% for Social Security and 2.9% for Medicare (15.3% total). If you have a vendor or customer that has not paid their bill, has gone out of business, or has not responded to any attempt to pay off their balance, business owners can claim a deduction from this "bad" and uncollected debt. New businesses can deduct up to $5,000 in taxes for startup costs and an additional $5,000 in organizational costs. This deduction is ideal for new businesses that have invested money to form and start their LLCs. For the 2022 year, you can deduct 100% of business meals when "talking shop" with employees, but keep your receipts. ![]() Luckily, this has changed since the COVID pandemic. Prior to 2021, business meals were capped at 50%. This can include everything from your monthly cell phone bill to the cost of your new smartphone. You can write off your cell phone or landline use as long as you use your phone for business purposes. These can include air travel, business lodging, meals, entertainment, parking fees, car rentals, and gas. You can deduct 100% of your business and travel expenses.
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