Do you own your own business or are self-employed? Have you ever wondered how you can maximize your business tax deductions? Maybe you have asked yourself what you can and what you can’t deduct on your taxes? The quick answer is that you can’t deduct personal expenses for business.
As this point you have questions. One question you’ll ask is, I spent the money on a particular personal expense for a business purpose? In reality, every personal expense has the potential to be a business expense under certain circumstances. What matters is, do those circumstances apply to you?
Tell Me About Food As A Business Tax Deduction
Business expenses must be deemed ordinary, necessary, and reasonable for your type of business. If you buy meals for yourself as a self-employed person, they’re not deductible. After all, you’re going to be eating whether you are working or not. There are situations where meals are deductible, such as when you’re with an employee, client, or vendor for a meeting. Also, in specific types of businesses food may be a part of the production costs. Think about a streaming channel where you’re producing cooking shows or food challenges for your subscribers. For this business the meals are more than “just having lunch,” they’re part of the product you’re selling.
Can Clothing Be Deducted For My Business Taxes?
Clothing is another personal expense item that many small business owners want to deduct but doesn’t typically apply. There are videos circulating on social media that you can have your suits monogrammed to call them “uniform expense.” Does that suit become ordinary and necessary for the business if the inside of the jacket is monogrammed? Unlikely, because the suit isn’t required for the business owner to wear for the business. They have other acceptable options and it can still be worn for personal use reasons. However, if you buy a particular piece of clothing to generate interest in your business and then generate revenue by selling it as “worn in ______ event/video,” it could be a different story.
Travel Is A Part Of My Business. Can I Use That A Business Tax Deduction?
Travel often comes up for sole proprietors and small business owners, as well. Is my travel deductible as a business expense? Questions you may want to ask yourself include, was the travel for business purposes? Would I have taken this trip without business reasons? For example, if you took a three (3) day trip for a business conference and two (2) days were spent in meetings or other business functions, while the third day you enjoyed personal relaxation, then the two conference days of the three total days would be deductible as a reasonable business expense.
The intent of an expense matters and this isn’t advice to try to deduct items with false justification of why you spent money on them. If it can be reasonably deduced that the item was intended to generate additional income, then it is likely a business expense. Consult your tax advisor so you can be sure not to miss any of the weird one-off items you bought with a business purpose. And, as always, keep your company or self-employment expenses in a separate bank account or on a separate credit card, so you can easily separate and review expenses with your tax professional at tax time.
If you’re unsure the best way to start or clean-up your records and books to prepare for your taxes, or if you need a tax professional to help you file, please reach out to us at firstname.lastname@example.org!