Running a small business is not easy, but it is well worth it when the business is garnering a profit. Knowing what business expenses you can deduct is imperative, and it is always a wise idea to contact a financial accountant to guide you in the right direction as to which expenses are appropriate to deduct and which are not. The last thing you want to do as a business owner is to run into trouble with the Internal Revenue Service for line items that may not be appropriate. The IRS offers extensive information on their website in regards to deducting business expenses.
The U.S. Small Business Administration offers insight on out-of-pocket expenses and explains what can be used as deductions. Here are three of the many business expense deductions that can be taken.
The home office can be claimed as a business deduction as long as the area is being used for the home office only. If the area is used for any other purpose it cannot be claimed as a deduction, so be sure to keep your home office a sacred space for your business. Figuring out the deduction is fairly simple to do. Measure the area where your work is and divide it by the square footage of your home. The percentage will give the amount of your space that can be deducted.
If you use your car for your business, be sure to keep track of the mileage, tolls and parking fees. These can be deducted as business expenses. The easiest way to keep accurate records is by placing a notebook in your car or adding an app such as Mileage Expense Log to your cell phone that can keep track of these expenses. There are numerous excellent apps available for collecting mileage. Research to find the one that best meets your needs.
Equipment that is used solely for your small business can also be deducted. Items such as fax machines, copiers, cell phones and computers can all be deducted. The two options available for deducting business equipment are to take a 100 percent deduction upfront or the depreciated value of the equipment over five years. A financial expert would best be able to help you determine which option is the best way to go for your particular financial situation.