Categories: Tax

Personal Expenses versus Business Expenses

Generally, you cannot deduct personal, living or family expenses. However, if you have an expense for something that is used partly for business and partly for personal purposes, divide the total cost between the business and personal use. You can deduct the business portion.

For example, if you borrow money and use 70 percent of it for business and the other 30 percent for a family vacation, you can deduct 70 percent of the interest as a business expense. The remaining 30 percent is personal interest and is not deductible. Here are six small business tax deductions you can take to potentially reduce your taxable income.

Home Office Deduction

Is there a specific space in your house that you use to work from home and you work from home regularly?

Then you can deduct certain home-related expenses, which could include mortgage interest, insurance, utilities, repairs and depreciation. The home office deduction is available for homeowners and renters.

Retirement Plans

Contributing to a retirement plan is a simple way to take advantage of a tax deduction. Full-time employees with a work-sponsored retirement plan who freelance on the side can still use a SEP IRA or SIMPLE IRA as well.

Travel Expenses

What if you want to go visit your parents and there just happens to be a conference in the area? You can deduct the cost of traveling to the conference and staying in the hotel while you squeeze in some time to visit with your folks.

Just be careful about what you’re deducting. The IRS won’t view the cost to drive to your parent’s house or take them out for a steak dinner as business expenses. Taking your kids with you can’t be expensed either.

Hire Your Children

That’s right. You can hire your kid (or kids) to help with the business. Your child can earn up to $6,300 without having to file taxes. If your business is taxed as a sole proprietorship or partnership (in which each partner is a parent of the child) you won’t owe any Social Security or Medicare taxes on your child’s income if he or she is under the age of 18.

Holiday Parties

You can indeed expense the cost of throwing a holiday party for your employees. But be careful, there are regulations (like all employees need to be invited). Keep a copy of the invitation and guest list. And don’t get too lavish.

Entertaining Clients or Customers

You don’t get Mad Men-era tax breaks any more, but taking a client out to a fancy dinner, concert, sporting event or other entertainment for business purposes can be a write off. You can deduct 50% of the expense but be sure to keep proof of the guest list as well as how the event was related to business.

Brian Rodgers

Published by
Brian Rodgers

Recent Posts

Year-end Tax Savings with Depreciation

As we approach the end of the year, it’s a good time to think about…

2 years ago

Virtual Currency Transactions – Tax Treatment

Whether you've invested in Bitcoin and sold it at a profit or loss or received…

2 years ago

Qualified Opportunity Zones: Tax Free Real Estate Investments

A well kept secret found in the Tax Cuts and Jobs Act of 2017 is…

3 years ago

A Short Guide to Deducting Travel Expenses

If you have to travel as part of being self-employed, you know traveling costs can…

3 years ago

Year-End Tax Checklist

Maximize Your Retirement Account Contributions Now is the time to maximize contributions to your retirement…

4 years ago

This website uses cookies.