Last week we discussed three of the most commonly missed tax deductions that business owners often forget to deduct (or maybe don’t realize they are tax deductible) and this week, we are going to the final three that in our opinion, consist of the top missed deductions.
Again, we like to remind our readers that they should always consult with a tax expert to ensure that their taxes are done properly and that they have maximized their deductions to the fullest.
ICYMI here is the link for last week’s blog where we review the first three.
Continuing the list from last week,
4. Car & Truck Expenses
A lot of times business owners think it’s not worth the hassle to deal with mileage if they are not consistently using their vehicle for work purposes but even just a few trips a month can add up to a large deduction at the end of year.
There are two methods for deducting vehicle expenses- actual or standard mileage. With actual you keep track of the actual amount you have spent for gas, repairs, car payments, etc. and use the % for business vs. personal miles to calculate the deduction.
For standard, you simply multiply the mileage driven for business by the current standard mileage rate from the IRS.
Either method requires you to track your mileage but there are many free apps (and the ability to track
your mileage in the QBO mobile app) that make this an easy task.
5. Payment Processing Fees
It’s always a bummer to see those Paypal, Square and merchant transaction fees. Typically, payment processing fees aren’t accounted for when you mark an invoice as paid in your accounting software. For instance, say you invoice a client for $500, and they pay you via PayPal. When you mark the invoice as paid, you’ll record income of $500. But behind the scenes, PayPal is deducting a fee of $14.80 (that’s 2.9% of the transaction amount plus 30 cents) from your account.
No matter how much or how little business you’ve transacted over the site in the course of a year, make sure you print out an account history at the end of the year and pick up these fees as bank or payment processing fees expense.
6. Digital Downloads
If you purchase fonts, stock photos, templates, workbooks or other digital products for business use? Because these are typically modest amounts on an individual transaction level, many business owners don’t think to deduct it. that can really add up over the course of a year. But they’re easy to overlook when you purchase them only occasionally.
Be sure to purchase items using your business debit or credit card to make it easier to track these expenses throughout the year. You can lump them together and call the expense digital downloads or cost of goods sold when you deduct them on your return.
We hope you found a few items that you wouldn’t normally think of and that your 2020 tax return will be the better off for it!
If you have any financial needs, please reach out to us. At Abacus, we stress the numbers so you don’t have to!