If you’re self-employed, don’t forget to grab a copy of your receipt.

If you’re self-employed, taxes are likely not the first thing on your mind each day. But, ignoring your tax
situation could be costing you. That’s because the purchases you make could be eligible for a tax deduction. Things like company meals, home office equipment, monthly internet usage, and phone bills all qualify for a discount.

But, failing to keep track of these receipts throughout the year can leave owners and self-employed people scrambling. To prevent this last-minute rush from stressing you out during tax season we’ve outlined the top five purchases you didn’t know were tax deductible.

1. Home Office Expenses

The most complex deduction that self-employed people are eligible for is the home office deduction. This deduction is defined as any area that is used regularly and solely for the purpose of the business (regardless if this is a rented space or owned).

To calculate the deduction amount, there are two options. The first is to use the ‘simplified method’ which multiples the IRS’s pre-determined rate by the home office’s square footage. However, to use this option the home office must not be more than 300 square feet and the person cannot claim any other itemized home office-related deductions.

The second option is the standard method. For this, it requires more tracking and record-keeping as each receipt will need to be tracked. For example, the space itself, the business percentage of home depreciation, utilities, home insurance, repairs, etc. will all need to be itemized. So, if you choose to apply, use this type of deduction just be sure to keep copies of all of these bills in case the IRS requests them.

2. Internet and Phone Charges

Even if you don’t claim a home office as a deduction on your tax return, you can still claim your internet and phone bills. Of course, the amount claimed can only be the business portion of them. This means that only expenses directly related to the business can be submitted. Otherwise, if you submit an entire bill that has personal use charges on it, the IRS can come back to question it.

3. Meals

If you’re traveling for business, are entertaining a client, or are at a business conference then the meals purchased during these outings qualify for a tax deduction. But just be sure that the meal is not extravagant (given the circumstances) or the IRS can flag it and contest it.

There is also good news when it comes to this deduction given the recent Consolidated Appropriations Act (CAA), 2021. H.R. 133 which now allows a 100% expense deduction for meals (rather than the previous 50%). However, this is only in effect until the end of 2022 so be sure to hang onto every one of those receipts for reimbursement.

4. Vehicle Usage

If you use your car for business then the expenses related to those trips are eligible for deductions. To claim these expenses the IRS needs very detailed records. This means that you will need to submit the date of the trip, mileage taken, and its purpose to prevent the IRS from questioning it.

5. Interest

Another expense that is tax-deductible is interest fees on a business loan or credit card. Just be sure that if the loan was taken out and split up between personal and business use that it is just the business portion of the loan’s interest that is being submitted.

Although gathering all of these receipts and information can seem like a chore, it’s an essential one for saving money. Without it, owners and self-employed people won’t be eligible for a return. But that’s why we’re here. At A.P Accounting & Tax Services, we’d be able to keep track of all your receipts, file your paperwork and ensure every eligible expense is submitted. In turn, saving you valuable time and money in your day.

If you’re a business owner looking to save on costs, consider getting some professional help by speaking with us at 407-328-5001.

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