7 Common Tax Write-offs for Your Business.

By Nancy Huber – AVP, Treasury Management Consultant

What Exactly Is a Tax Write-off?

You’ve likely heard the phrase “We can write that off at the end of the year,” but what does it mean for your business? A tax write-off (or “tax deduction”) is an expense the IRS allows you to subtract from your taxable income, resulting in you paying less in federal income taxes overall. Therefore, if you’re strategic with how you manage business expenses, you could save thousands of dollars during tax season.

Business expenses can be fully or partially tax-deductible in the “Schedule C” section of a tax return, depending on your business structure, and qualifying write-offs are typically items found on your income statement (with a few exceptions). You need to be a for-profit organization to write off expenses, and it’s important that you keep accurate bookkeeping records and can show the receipts – literally in this case!

Key Tax Write-offs for Your Business:

1. Rent, supplies & services
2. Advertising & promotion
3. Salaries & benefits
4. Education & training
5. Travel
6. Meals & entertainment
7. Miscellaneous expenses

1. Rent, supplies & services

   If you rent a building or equipment for your business, you can often deduct the payments from your taxes. However, if you rent your home and also work from there, certain expenses won’t qualify and will instead be considered a home-office expense. Alternatively, if you operate out of a home you own and it’s your main place of business, you can likely write off certain costs.

   In terms of tools, shelving, furniture and other various supplies and assets, those costs could be potential write-offs, as well. The same can be said for services like telephone and internet, which are often considered crucial for business operations. It essentially boils down to what percentage of all this is going toward actual business activities. This is where proper record keeping and is key.

2. Advertising & promotion

   Good news! The cost of touting your business through advertising and promoting is fully deductible. So if you’re looking to design a logo, launch a new website, sponsor an event, run a social media marketing campaign or something similar, you’re golden. However, you cannot deduct payments earmarked for legislative causes, such as lobbying for certain business interests or funding a run for political office.

3. Salaries & benefits

   Payments to your workforce in the form of salaries, benefits and PTO are typically tax-deductible, as long as certain criteria are met. For one, the employee can’t be the sole proprietor, a partner or an LLC member. Their salary also has to be considered reasonable and acceptable in the eyes of the IRS.

4. Education & training

   Investing in your team’s growth? You’ve got the green light in the IRS’ world! Whether it’s classes, seminars, workshops or anything in between, educating and training your employees is 100% tax-deductible, as long as it’s directly related to your business and increases expertise.

5. Travel

   Travel is another factor to consider when thinking about tax write-offs. If you only use your vehicle for business purposes, you can deduct most vehicle expenses. However, if you use your vehicle for both business and personal reasons, you can only deduct business costs. This is calculated via a standard mileage rate or with a common-expense method (gas, oil, tires, repairs, insurance, etc.).

   At the end of the day, you have to track your business miles regardless. The IRS will likely acknowledge business travel by car, bus, plane or train. They’ll also give a nod to parking and tolls. They’re even OK with shipping of baggage and display materials. Daily commutes, however, are a no-go.

6. Meals & entertainment

   There may be no such thing as a free meal – but there is such a thing as a tax-deductible one! As a general rule, you can typically deduct 50% off food and beverage expenses, as long as the IRS considers it to be ordinary and necessary for conducting business. That means no unreasonable lobster, steak, caviar and champagne splurges! Also, the business owner or an employee must be present during the meal.

   Alternatively, if you’re merely buying pizza, sandwiches or other takeout to feed your employees during a long meeting or for after-hours work, that will likely pass the sniff test with the IRS. The same goes for office parties and picnics. Again, though, it ultimately can’t hurt to document, document, document.

7. Miscellaneous expenses

   There are a number of other expenses that are tax-deductible – from business insurance to interest to legal fees to moving expenses to contractors and more. This list goes on and on, and the same mantra continues: Be sure to consult with your tax professional and the IRS regarding the intricacies and requirements associated with each expense.