If you are self-employed and are going to do quite a few write-offs for your business, then it is important to understand how they work. Here are 4 types of write-offs you should understand so that you know what counts toward your taxes.
First, you need to know what types of write-offs count. If you have a home office where you do all of your work, for example, then you can write off the space by giving the dimensions and the cost of you total rent or mortgage per month.
Note, however, that the entire rent or mortgage total will not be subtracted from your income. Instead, the mortgage total will be divided by the amount of square footage in your house so that only a portion of the money is put toward your office space.
Also, calculate your miles when you drive to meet clients and to have meetings. You cannot, however, double count the miles if you have more than one business. Even though the drive may work for both businesses, you are only at liberty to use them for one business.
Pick the business you want to use them for as long as they accurately apply, and make sure that you record the miles in a spread sheet with the date, the number of miles, and where you went. This is important if you ever get audited and have to account for all of the miles.
If you are self-employed and you do not have a spouse who receives health benefits from an employer, then you are at liberty to write-off the expense of carrying health insurance. This also applies for vision insurance and dental insurance.
If you choose to get personal health insurance on your own even though your spouse could get benefits from his or her work, then you cannot claim the insurance as a write-off, so make sure that you do not record the insurance cost if this is the situation.
Lastly, you can write-off some meals on you taxes depending on who they were with and where they were. If you have business lunch meetings or dinners at restaurants, then you can write these meals off entirely. If you go to dinner with friends who ask you about your business, you cannot count this. Simply talking about your business does not make the meal a business meal.
The only way around this is if you go to lunch with someone, whether they are a friend or not, and they are a potential client who needs your services. If this is the case, then you can pay for their lunch, and you can write it off.
By understanding these 4 points, you now have a better understanding of what you should and should not write-off when you do your taxes. For more information, check out companies such as Groskreutz, Schmidt, Abraham, Eshleman & Gerretse CPA.