Mark your calendars, April 15th will be here before you know it. Looking ahead for ways to prepare for Tax Day, keep in mind there are a few write-offs that are often overlooked. Claiming deductions is a great way to reduce your income tax bill come tax time. Claiming deductions can free up additional money to spend where you really need it, like growing your business.
First things first, what’s a tax deduction and what’s a tax credit?
A tax deduction reduces your taxable income. A tax credit reduces the amount of tax you owe the IRS. Remember, your tax credit is applied to your tax bill after your federal income tax is calculated.
Now, let’s take a look at some common deductions that are sometimes overlooked.
More and more businesses in the U.S. are run out of a home office. Home office deductions are available to home owners and renters and is available for all home types. When you run a business out of your home you will accumulate ongoing expenses that you can deduct throughout the year. Do you have a designated office area? What type of hours is the space used? Is it your principal place of business? These are some questions to consider to get you started. And here are some answers from the IRS.
Keep track of your vehicle use all year because you can deduct expenses like gasoline, maintenance and tolls. You should also get to know the IRS standard mileage rate. With vehicle expenses it’s important that your documentation is ongoing and accurate. . You can learn more about that here. And check out some helpful tips to make the most of your vehicle and deductions here.
Not all charitable donations qualify as a write-off. They are only tax deductible when they are made to a tax-exempt organization that qualifies. Make sure to keep a record of what you gave, when you gave and any accompanying documentation. You don’t need these items to file your deduction, but you will need it for a potential audit. Better to be safe than sorry! Here are some rules regarding qualifying organizations.
Did you design a new logo? What if you launched a new website? Maybe you ran a social campaign? The cost of advertising and promotions is deductible. Purchasing advertising space whether its online or print are also write-offs.