TAX ADVANTAGE INK, LLC

DOCUMENTS FOR TAX PURPOSES & DOWNLOADABLE TAX APP, VCITA

(PDF listed below of required documents to file your tax returns)

Legitimate business expenses:

 Expenses for Business Use of Your Home

Any expenses you deduct must be directly related to your business. Allowable typical expenditures are similar to those allowed for office-based businesses. Common deductions include:

Fully deductible expenses

• Insurance

• Rent

• Utilities

• Repairs and maintenance

• Home depreciation

• Deductible mortgage interest

• Advertising, marketing, and promotion

• Labor

• Rent, utilities, and phones

• Benefits, continuing education, or training

• Fees, dues, and subscriptions

Partially deductible expenses

• Gifts - If you give your clients holiday gifts, you can spend as much as you want. But you can only deduct $25 per gift. Consider giving a charitable donation in your client’s name instead; the donation is probably fully deductible.

• Meals and Entertainment. Because you also benefit from the meal or entertainment, only 50% of the tab is deductible.

Rule three: Split personal and business expenses

• Splitting personal and business expenses can get tricky. Pay close attention to IRS documents for help. For example:

  • Home office. You can deduct a home office or storage space up to 300 square feet. Calculating the deduction requires determining the total square footage and apportioning it across all related expenses. These include maintenance, repairs, insurance, utilities, and mortgage interest. However, the deduction is often worth the calculations. The IRS provides a worksheet.

  • Mileage. If you use a personal vehicle for business, keep track of the miles traveled and all other vehicle-related expenses. Be sure to document those used exclusively for business. Compare mileage records to actual maintenance expenses, then decide which method will give you a more significant deduction according to IRS constraints.

    Caution!

    Some business expenses are never deductible. These include bribes and kickbacks, political contributions, memberships in social clubs (even if you entertain clients there), and any previous tax penalties or fines.

However, your deduction is limited to the percentage of your home dedicated exclusively to your business.

For example, if only 10% of the square footage of your house is solely reserved for business use, you can only use 10% of your home expenses as a business deduction.