Hoping to lower your tax bill? Many professionals miss tax deductions each year because they aren’t aware of them or fail to keep the necessary records required to substantiate such deductions. Below are some of the tax deductions that are often missed.
1. Local transportation: Professionals can deduct the costs of local transportation expenses if they are ordinary and necessary for their business. It doesn’t matter what transportation you choose – car, taxi, bus, train, etc. It also does not matter whether the vehicle you use is owned or leased. However, proper documentation must be maintained and transportation is often considered a red flag for the IRS.
2. Long-term assets: Long-term assets are those that you reasonably expect to last for more than one year. For professionals these often include office furniture, computer equipment, specialized equipment (e.g. dental or medical), buildings, and automobiles. Long-term assets can be depreciated (i.e. a portion of the cost is deducted each year over the asset’s useful life) or by deducting the entire costs in one year using Section 179 of the Internal Revenue Code.
3. Home office deduction: If you regularly work from home, you may be able to claim the home office deduction. However, there are strict requirements you must follow in order to claim this deduction. Furthermore, how you claim the deduction will depend in part on what type of business entity you have. For more information on the home office deduction please see my earlier blog post – The Home Office Tax Deduction – dated June 29, 2011.
4. Health insurance: As business owners, professionals can deduct many of their health insurance costs from their taxes. In addition, professionals may also be able to deduct a wide variety of uninsured medical expenses, including nonprescription medications, acupuncture, and eyeglasses.
5. Retirement plans: Professional small business owners are allowed to set up retirement accounts specifically designed for small business owners. These accounts provide enormous tax benefits that are intended to maximize the amount of money you can put away in tax-deferred accounts during your working years. As a result, professional small business owners are often in a better position than employees at most companies when it comes to saving for retirement.
For help with your tax matters contact Hone Maxwell LLP today.