The world is changing, and so is how and where we work.
With more and more of us shifting to working from home, it’s important to know the financial benefits that come along with it.
Many business owners are surprised to learn that taxes are one of their biggest costs as an entrepreneur. Soul crushing, right? That’s why it’s so important to be aware of as many deductions and credits as possible to keep more of your money in your pocket!
Check out this list of 105 possible tax deductions and credits for business owners who work from home.
- Accounting fees
- Advertising and marketing
- Auto expenses
AUTO EXPENSES DEEP DIVE
Driving to and from client meetings, conferences, and vendor locations are all considered business mileage. Commuting to and from your office or co-working space is NOT considered mileage. To deduct your auto expenses, the first thing you have to do is track your mileage. You are required to have a log of all business mileage throughout the year, as well as the total personal miles driven.
ACTUAL EXPENSE METHOD
The deduction is based on the portion of mileage used for business. You take your business use percentage (business miles divided by total miles) and multiply that by your total vehicle expenses for the year, and then that’s your deduction.
Not interested in keeping track of every time you get gas? No worries. With the standard mileage deduction, you simply take the standard mileage rate and multiple it by your total business miles driven for the year.
- Adobe Creative Suite
- Banking fees
- Blue light filter glasses
- Building repairs and maintenance
- Business association membership dues
- Business cards
- Business trips
- Charitable deductions made for a business purpose
- Child Tax Credit
- City Taxes
- Cleaning/janitorial services
- Collection expenses
- Commissions to affiliates
- Computer and tech supplies
- Computer insurance
- Consulting fees
- Continuing education for yourself to maintain licensing and improve skills
- Conventions and trade shows
- Cost of goods sold
- Coworking memberships
- Credit card merchant service feeds
- Display Ads
- Earned Income Tax Credit
- Education and training for employees
- Exhibits for publicity
- Facebook Ads
- Franchise fees
- Freight and shipping costs
- Furniture and fixtures (limits apply)
- Google Ads
- Gifts for customers (limits apply)
- Health insurance premiums
- Equipment repairs
- Hard drives & digital storage
- Health savings account
- Home office
HOME OFFICE DEEP DIVE
If you use a portion of your home exclusively and on a regular basis for business use, then you are allowed to deduct a portion of your home expenses, including:
- Real estate taxes
- Mortgage interest
- Repairs & Maintenance
To use this method, you take your home office square footage and divide it by your total home square footage. You then multiply that percentage times your total home expenses to find your deduction.
Ex: Molly has a home office that is 100 square feet that she exclusively uses for her marketing business. She rents her home, which is 1,200 square feet. Her total annual rent, renters insurance, and utilities cost $15,000. Her business use percentage is 8.3% (100 divided by 1,200), so her home office deduction is $1,250 ($15,000 times 8.3%).
Not really up to keeping track of all of your home expenses throughout the year? Problem solved. Just multiply your home office square footage by the set rate of $5 to find your deduction. The maximum deduction allowed is based on 300 square feet.
Ex: If Molly used the simplified method, she would take her office square footage (100) and multiple it by $5, so her deduction would be $500.
- Office chair
- Instagram Ads
- Interest paid
- Internet (portion used for business)
- Investment advice and fees
- IRA contributions (limits apply)
- Legal fees
- Leased vehicle or equipment
- Liability Insurance
- License fees
- LinkedIn Subscription
- Losses due to theft
- Maintenance and repairs
MEALS DEEP DIVE
You can deduct 50% of your meals as long as you meet these requirements:
- Meet with a business contact
- Discuss business
- Pay for your and their meal (it cannot be lavish or extravagant)
- When traveling for business, ALL of your meals (even meals by yourself) are deductible.
- Your meals with employees are only deductible if it is used to improve productivity.
- If you offer an open house or office party, your meals are 100% deductible.
But just remember, while meals are deductible, entertainment expenses are NOT. These entertainment expenses include country club membership fees, golf tee fees, yoga classes, sporting events, etc.
Ex: Kiara takes a client to a baseball game where she buys hot dogs and beers for herself and her client. The cost of the game is not deductible. However, she can deduct 50% of the cost of the food and drinks as long as they were purchased separately from the tickets.
- Mortgage interest on business property
- Moving expenses
- Newspapers and magazines
- Office supplies and expenses
- Payroll taxes for employees (including Social Security, Medicare, and unemployment taxes)
- Parking and tolls
- Pension plans
- Phone (cell or home) (portion used for business)
- Phone service
- Phone applications
- Print Ads
- Printer & paper
- Prizes for contests
- Professional Coaching
- Project Management Software
- Rebates on sales
- Research and development
- Retirement plans
- Safe-deposit box
- Sales Tax
- Security programs
- Social media advertising
- Software and online services
- Storage Equipment
- Storage rental
- Telephone (business use portion)
- Video equipment
- Virtual workshops & seminars
- YouTube channel
- Wages and salaries paid to employees
- Wethos back office services
- Website design
- Website hosting services
- Wifi mobile hotspot
- Workers’ compensation insurance
- Zoom and other telecommunication software
It’s important to note that while this list is just a start when it comes to the potential tax deductions and credits available to freelancers and small business owners, not every one of these items is always an applicable deduction depending on your situation.
Want to know which of these 109 items are applicable for you? Schedule a free consultation with me to review your business expenses and see where you can save. For more financial tips & tricks, check out my website at www.newwayaccounting.com