5 TOP Tax Deductions if you are an entrepreneur
If you have a side hustle or a small business, you will want to ensure you are taking advantage of the tax deductions that are commonly overlooked by small businesses.
As you are going through the year is the time to pay attention to what you are doing and what might be a tax write-off. It is so much easier to do as you go then try to remember items from several months ago. If you are anything like me, things slip my mind and will not be recalled unless they are recorded in the moment or shortly after.
Here are my top 5 items you may want to keep track of and talk with your tax professional about whether or not you can utilize them and how to keep records.
1. Travel Expenses
I think this is the one that is either underutilized or not utilized properly for many entrepreneurs. If you are traveling for work, you have the possibility of claiming 100% of those travel expenses. This is airfare, hotels, rental cars or Uber/Lyft expenses, etc.
Now if you are traveling for personal reasons and are 'working' while you are on family vacation, you are stepping into what I call the "gray zone" which simply means it very likely is not deductible, but you will want to talk to your tax professional to know for sure.
If you don't use a tax professional (my opinion- anyone who is an entrepreneur should because the tax law is extremely complex for us) you can read the guidelines from the IRS on what qualifies as travel expenses.
2. Dining and Meal Expenses
In 2022, 100% of business meals at a restaurant are deductible due to a law passed to help restaurants recover from the Covid pandemic.
Meals are typically deductible for businesses when there is a business purpose to the meal. You will want to talk to your tax professional to determine what this means exactly, but often, your normal meals (breakfast, lunch, dinner) that are eaten by yourself near your business home, are not going to qualify as a business deduction.
Side note: Keep all your receipts for meals deductions and note them with the who you met with, what was the purpose of the meeting for audit purposes.
3. Business use of your cell phone and internet
So many entrepreneurs are using their cell phone and working out of a home office these days, but are not taking these two expenses.
Now, understand, you cannot take 100% of your cell phone and home internet in most cases, but a part of this bill should be written off as a business expense for you.
The same goes for purchases of new phones or laptops or other technology devices. You may need to determine a percentage of usage if these items are used for both personal and business to determine how much can be allocated to the business for you.
4. Mileage for your vehicle
Even if you have an online business, you are driving for your business. Maybe you go to in-person networking events or go to pick up office supplies, drop something off or meet with a client- you are doing some sort of driving I would imagine.
What about driving to the airport to travel? That counts also.
This is one expense I find most entrepreneurs don't think is worth the hassle to write-off but let me tell you, for me, this accounts to $1000 minimum a year usually.
I like to use an app because I am just not really a paper and pen gal personally.
If you are a paper and pen type, you can use a paper mileage log, or if you are not you can use an app to track and sort mileage expenses. I personally love MileIQ. It is so simple to use and I just have it run in the background so it captures my business drives without me having to remember to turn it on.
5. Home Office
If you work from home, you may have a home office deduction you can take.
The space does have to be dedicated solely to the business for it to qualify, but even if you have a corner of a room where your desk and computer live and that is where you work, it could be a potential deduction for you.
However, your dining room table where you work during the day and your family eats at night, will not qualify!
With all of these, you will need to check with your tax professional to ensure you are able to take the deduction, but also to ensure you are keeping the records needed to support said deductions.
What is a business deduction that you feel like you didn't know about until someone else told you about it?