Tax Deductions For The Self-Employed
It can be difficult to completely understand what does and doesn’t count as an expense deductible as a business owner. Many self-employed individuals can feel some confusion on what is considered a deductible expense. These expenses offset your income, lower your profits on paper which therefore decrease your tax burden for the year. Below are the main deductibles that you’re able to claim as a business owner.
Business Operating Expenses
Money that is spent to run your business is considered a deductible expense. This includes things like advertising fees, start up costs including interest and fees on money borrowed for your business, as well as any delivery or shipping costs for supplies.
Other expenses that are considered deductible are legal fees, accounting, telephone and utilities. Office supplies are also be deductible, including computers, notebooks, pens, printers, fax machines, manuals, etc.
Office and Home Office Expenses
Whether you rent an office space or work out of your home, there are purchases you can deduct. For example, the rent you pay and any services or products that are necessary for the space.
This includes things like coffee makers, coffee, toilet paper, printing materials, ink for your printer, folders etc.
Home Office Deductibles
To calculate your home office deductibles, you will need to calculate the percentage of your office within your home’s space. For example, your office is 100 square feet and your home is 1,000 square feet. That makes your office 10% of your home therefore you can deduct 10% of your mortgage, home insurance, security fees, repairs, and other related costs on your income tax return.
Just remember to keep all your receipts, that includes any online receipts and bills that are mailed to your inbox.
Travelling & Entertainment Expenses
Any forms of travel for a business related event means that you can deduct all your travel expenses including public transportation, hotel costs, and conference fees. However, you are only able to deduct 50% of your entertainment and meal costs.
Your vehicle – if used only for business – can be deducted including gas, insurance, repairs, parking fees, and related expenses. If you use your vehicle for business as well as personal use, you can only deduct a percentage of those costs based on how often you use your car for business.
If you were to drive 25,000 km and 5,000 km of the total is for business, you can deduct 20% of your vehicle expenses from your self-employment income. It is of utmost importance to keep a log book of all the kilometers put on your vehicle for business in order to accurately claim vehicle expenses. The exact numbers can be tricky to figure out, so be sure to consult your accountant before making any solid decisions.
Frequently Missed Expense Deductibles
There are several items that are frequently missed expense deductibles.
- Cost of cheques and yearly dues for commercial or trade organizations
- Parking fees
- Private health plan premiums for yourself and/or your employees
- Interest on vehicle payments
- Cleaning supplies for your home office
- & more!
Of course, each self-employed person has different circumstances. Not all of these tax deductions will apply, and some may seem like grey areas such as your vehicle usage. Make sure you’re getting personalized advice that makes sense for your needs.
We at Bruce L Anderson CPA are always happy to support entrepreneurs and business owners. If that’s you or you know someone who is self-employed who needs more in depth advice, be sure to send them our way!
Call Bruce L Anderson, CPA for assistance at 250-592-8612.
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We are never too busy to take the time for a phone call. If you have questions about your self-employment tax deductibles, make an appointment with Bruce today!