Top 5 Tax Deductibles for Self-Employed Workers and Small Businesses
Top 5 Tax Deductibles for Self-Employed Workers and Small Businesses |  |
| Top 5 Tax Deductibles for Self-Employed Workers and Small Businesses Posted: 18 Aug 2011 04:13 AM PDT
With so many challenges facing small businesses and self employed workers, particularly in the current economic climate, it is often difficult to stay on top of everything and find the time for some of the less interesting stuff. With the day-to-day struggle to find clients or customers and keep the income coming in, many businesses leave tedious stuff like taxes until the last minute and consequently neglect to take advantage of everything they can claim for. This is a mistake as the tax advantages of working for yourself or running your own business are numerous; indeed there are a number of areas that you can save yourself a lot of money by making significant deductions (for costs) from your tax bill. [Also See Income Taxes and the Self-Employed and Tips for Starting a Home Business]
The first thing to do, of course, is get yourself a good accountant. They will be able to point out the tax deductibles that are specific to your particular industry or area of employment. However, in the meanwhile this article will go through some of the most common tax deductibles and how you can take advantage of them. The only thing you need to remember, above all else, is to keep records of absolutely every transaction you make, no matter how small. Save every single receipt. If you purchase something online, print off the receipt immediately and file it away. Doing so will save you a great deal of trouble when it comes to doing your taxes at the end of the year. 1. Office Premises The first area of tax deductibles to think about have always to do with the office premises itself. Naturally you can claim for the cost of buying or leasing a business premises. But for most self-employed workers and even for a large number of new small businesses those premises might be at home. What many of them don’t realize is that you can make deductions on home or home-office premises too. The way to do this is to calculate what percentage of your property can be classed as being used for your home business. Once you have done this you can then take this percentage off your mortgage or lease payments. After you have done this, make sure you also claim for any expenses that related to the building or maintenance of that home office premises, whether that was the cost of erecting a wooden office at the end of the garden, an extension on the side of the house or just installing a door on the spare room. 2. Utilities Secondly, remember that your business can claim for any utilities it uses. These would include phone, broadband, electricity or gas. Again, if you work from home you can work out what percentage of your utility bills relates to the business and deduct that from your tax return. In addition make sure you keep receipts for every single piece of equipment that you use in your business. This will range from the obvious, like desks, chairs, computers, printers, phones and faxes to the less obvious, like curtains, carpet software, hosting accounts, apps, stationery and a hundred other expenses. 3. Travel Next, ensure that you record every single travel expense, irrespective of how small it is, as long as it is to do with the running of your business. Most journeys can be divided into those made for pleasure, those made for business and those made for both business and pleasure. The size of the tax deductions you can make will depend on whether your journey is for business or for business and pleasure. Many small businesses and self-employed workers find that keeping a log-book in the car so that they can precisely record any journey made for business purposes is extremely useful. 4. Training Courses Fourthly, most freelancers and businesses don't realize that they can claim for any training courses or professional courses that are relevant to their business, especially if they lead to them receiving some type of professional accreditation from their industry. If you are self-employed or running small business, it is the perfect time (if you can fit it in) to add those skills to your resume that you've been planning on studying for years. 5. Staff Finally, remember that if you need to hire anyone for any reason because of your business, then the cost will be deductible. Again there are obvious examples such as employees, accountants, lawyers or freelance web designers or IT specialists and then there are the less obvious people you might spend money on such as babysitters or nannies. All are equally tax deductible. As I mentioned at the beginning, the best way to stay on top of your tax deduction strategy is to save every single piece of paper. Not only will you pay much less tax, you will also save yourself the nightmare of that end of year panic to get the return organized and filed. Alex is a freelance journalist and financial blogger. He loves to write about baseball and jazz but spends most of his days writing about mortgages and tax reduction |
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