Are you still wondering what or which expenses you can deduct on your tax return? If you save all your documentation, receipts and invoices this is just a piece of cake. Yesterday was Valentines Day, but dinner with your spouse does not count as a meal and entertainment deduction. Even if your loving spouse is your business partner.
Let’s see other deductions you can include in your tax return:
The business expense must be both ordinary and necessary. What is ordinary and necessary expense anyway?
These are expenses for income tax purposes and expenses that are generally considered a tax-deductible in the year they are incurred. For example, a uniform for workers, wages or salaries to employees for service rendered. Money allocated for retirement plans like 401K. Taxes paid that a directly associated with a trade or business. Rent expense, Interest, Taxes, Insurance for the use of a property you use in trade or business.
Cost of Good Sold. If your business manufactures product and sale it, you must have inventory which is the beginning and the end of each tax year to determine your cost of goods sold unless you are a small business taxpayer. Some of your expenses may be included in figuring the cost of goods sold. The cost of goods sold is deducted from your gross receipts to figure your gross profit for the year. If you include an expense in the cost of goods sold, you cannot deduct it again as a business expense.
Personal versus Business Expenses. You cannot deduct personal, living, or family expenses. However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal parts. You can deduct the business part. For example, if you borrow money and use 60% of it for business and the other 40% for a family vacation, you can deduct 60% of the interest as a business expense. The remaining 40% is personal interest and is not deductible.
Capital Expense. These are the assets in your business: Business start-up costs, business assets, improvements over the course of your business.
Business use of your home and car. If you use part of your home and your car as a business, you may be able to deduct the expense. Like for personal and business allocation, you have to divide the cost for business and personal use.
This list is not all inclusive of the types of business expenses that you can deduct. For additional information, refer to Publication 535, Business Expenses.