Expenses are inescapable, and anyone who has tried managing their finances knows that. Business expenses, in particular, are even more unavoidable. But if you are careful enough, you can use them to reduce your tax liability. So when you hire an accountant for tax services in Kearny, NJ why not ask them about it? If you have your own business, it helps to know where you can save money and grow your profits. And when you know just what business expenses to deduct, you can make sure that you are paying no more than you need to.
But first, what are business expenses?
These are the costs you incur while operating your business. These are crucial since what you choose to spend money on for your business will play a role in whether you will acquire a net profit or loss during that period. So, not only should you know which business expenses are tax-deductible, but you should also manage your business finances carefully and make the right investments.
Now, what are deductible business expenses?
These are almost any necessary, ordinary, and reasonable expenses that can help your business earn income. Before being subjected to taxation, these expenses can be subtracted from a company’s income. But what exactly do necessary, ordinary, and reasonable expenses mean? According to the IRS, these are defined as any expenses that are helpful and appropriate for a business. If you want to know more about this, ask your accountant the next time you hire accounting services in Kearny, NJ.
Here are some deductible business expenses:
- Self-employment Tax
If you are self-employed, you can deduct half of your tax liability. This type of tax refers to the employer portion of Social Security taxes and Medicare that every self-employed person must pay.
- Business Mileage
If you drive a car while conducting business, you can deduct business mileage for any business miles driven. Business mileage can be any other mileage from your place of business to another location. This is as long as the travel was for business purposes. You must keep a daily log of your mileage.
- Home Office
This is the cost of any workspace that you regularly and exclusively use for your business. This is regardless of whether you own or rent it. Although you are basically on the honor system, you should still be prepared to defend this deduction in case you are audited by the IRS. In that case, it is better to ask for help from your accountant.
- Meals and Entertainment
This depends on the situation but you may be able to claim from 50% up to 100% of your meals and entertainment expenses.
- Internet and Phone Bills
You can deduct your business internet, phone, and fax expenses as long as they are directly related to your business. This is also deductible regardless of whether you claim the home office deduction. But if you only have one phone, you shouldn’t deduct your entire monthly bill because it includes both personal and business use.
- Employee Wages
In general, wages, bonuses, salaries, or other non-cash compensations given to your employees are deductible as are the employer portion of payroll taxes.
- Advertising Expenses
Businesses need advertising. And if you have acquired reasonable advertising expenses to promote your business, these are typically deductible.
Other tax-deductible business expenses are health insurance premiums, travel expenses, publications, subscriptions, and more. If you want to know more about this, get accounting services in Kearny, NJ from Nicholas J. Coco, CPA and he will help you determine which of your business expenses are deductible.