There are two deductions that are often missed because small business owners and those who are self-employed only focus on tax issues during tax season instead of having a year-round tax strategy.
Business Mileage on Your Personal Car
This deduction is frequently missed because small business owners and people that are self-employed do not keep proper records or simply don’t know they can. Simple trips from the main office to other offices, to meet with workers, clients or customers, or to business-related locations are deductible. If the standard mileage allowance of 56¢ a mile is used, there is no need to record car repairs or other vehicle-related expenses. Business mileage of just 41 miles a week in a personal vehicle results in a $1,200 deduction.
And recording your business mileage is now very easy. There are a plethora of mileage-tracking apps for smartphones and tablets. The Penny Hoarder website has a review of seven apps that you can use to track your mileage and not have to worry about when tax season comes.
Home Office Deduction
The deduction for a home office. Many self-employeds do not know they can deduct a home office when a portion of the home or even a portion of a room. This deduction is used as the principal place of business regularly and exclusively. Others do not realize that home office expenses can include a share of rent, utilities, homeowner’s insurance—even business usage of the internet, if records kept.
The simplified home office deduction method makes this deduction easy: a flat deduction of $5 per square foot of office space, up to 300 square feet. And if depreciation of this space is included in the deduction, under the simplified method the tax basis of the home is not reduced by the depreciation taken, so there is no recapture when the house is sold.
Don’t be that person when you are doing your own books. Two valuable deductions are frequently missed. if you are in the Orange County, CA area and you don’t have time or are having issues with your bookkeeping, give us a call at (949) 331- 8041 to book a free consultation.