Top 5 Missed Business Tax Deductions
November 15, 2007 · Print This Article
I spoke about tax tips for small business owners at a seminar this past weekend, and one of the questions I got was ‘what are the top missed business deductions?’
This is a great question, so here goes…
1. Automobile expenses – if you use your car for business, you can deduct a portion of your car expenses. You can either keep track of and deduct your (business related) actual expenses, or you can keep track of your business miles and use the standard mileage rate (48.5 cents per mile in 2007).
2. Startup expenses – business expenses incurred before you actually start the business used to have to be depreciated over 5 years. Starting after October 22, 2004, you can now deduct up to $5,000 of startup expenses in the first year of business. Startup expenses over $5,000 still have to be depreciated (over 15 years). Startup expenses include advertising, hiring employees, purchasing equipment, supplies and more.
3. Education expenses – you can deduct the cost of classes, seminars and other education costs if they are related to your current business.
4. Travel – when you travel for business, you can deduct the cost of the airfare, taxis, hotel, meals, and other travel related expenses. If part of your trip is for personal reasons, you may need to prorate part of the expenses. Also, if you bring your family along, only your own expenses are deductible.
5. Home office expense – many people choose not to take this deduction because it is considered a red flag. If you have a legitimate home office, then you should not miss out on this deduction just because someone says it could be a red flag (being self employed is a red flag, but you wouldn’t not go into business because someone says you’re more likely to get audited as a small business owner, would you?). Home office expenses include mortgage interest, real estate taxes, home owners insurance, utilities, and security alarm. You can only deduct the portion that represents your home office, but this can be a substantial deduction for many home based business owners.
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Hey Kristine,
This would apply also to renters right? What are the guidelines – does the room have to be exclusively for the business? Can you deduct even a portion of a room’s square footage, for instance if you use a closet as your office or a corner?
Thanks
Hey Carrie
Yes, renters can take the home office deduction.
It’s better if it’s a room used exclusively for business, but it can be part of a room, or even a closet. Just measure the area of the room that is used only for business.
However, it’s best if it’s not a dining room, living room or other “common area” that is used a lot for other purposes.
Hope this helps!
Kristine