Understanding Business Expenses: What You Can Deduct
Understanding what business expenses you can deduct is crucial for minimizing your tax liability and maximizing your bottom line. This comprehensive guide covers the most common deductible expenses for small businesses and freelancers.
Common Business Deductions
- Office supplies (paper, pens, folders)
- Software subscriptions and licenses
- Computer equipment and accessories
- Furniture and office equipment
- Legal and professional fees
- Accounting and bookkeeping services
- Business consulting
- Marketing and advertising expenses
Home Office Deduction
If you use part of your home exclusively for business, you may be able to deduct home office expenses. There are two methods to calculate this deduction:
Simplified Method vs. Actual Expense Method
Simplified Method
$5 per square foot up to 300 square feet maximum
Actual Expense Method
Calculate actual percentage of home used for business
Record Keeping Tips
Keep Detailed Records
Save all receipts and invoices. Digital copies are acceptable for most expenses.
Separate Business and Personal
Use separate bank accounts and credit cards for business expenses to simplify tracking.
Conclusion
Understanding and properly documenting business expenses can significantly reduce your tax burden. Always consult with a qualified tax professional for specific advice regarding your situation.
Track Your Business Expenses
InvoiceBite helps you organize and track business expenses for easy tax preparation.