If you've purchased business related equipment, paid tuition for work related education, or paid for business travel and lodging, you probably want relief. Paying taxes on money spent on work related expenses doesn't seem fair. If you haven't been (and won't be) reimbursed for those expenses, you'll want to itemized them as deductions using Schedule A of form 1040.
As always, we recommend that you document everything. Keep records of your expenses, and keep receipts. There are some qualifiers to be met, of course, and not every expense is deductible. What follows should get you started, but please do check with your CPA.
To qualify as a deduction, expenses must be for the sole purpose of conducting your business. Qualifying expenses must be common to persons in your field of business. For instance, if you're the only sales executive your niche claiming pony rentals as a business expense deduction, the IRS might find that a bit strange. And, expenses for which you have been (or will be in the future) reimbursed do not qualify. And, finally, your itemized deductions must exceed 2% of your adjusted gross income. You will only be allowed to deduct the amount in excess of that 2%.
Exactly which expenses qualify will be specific to your business and circumstances, so do check with your CPA . But, here are some of the more common expenses you'll want to keep in mind.
- Liability insurance premiums that you pay.
- The cost of continuing education, if job related.
- Union Dues and Fees, and trade association fees.
- Professional license fees.
- Business Mileage, Lodging and Meals while on business away from home.
- Home office expenses, if a home office is essential and required by your employer.
- Equipment.
- Furnishings.
- Some clothing and dry cleaning, particularly uniforms, where the clothing is not suited for everyday use.
Exactly what you can and can't write off will depend on your type of business and unique situation. You'll need to talk to your CPA about your exact circumstance. They'll help you get a handle on business related expenses and start planning to reduce your tax liability.
