As tax time approaches, all small business owners should be thinking about tax deductions!
Depending on the business structure and tax liability, some income taxes may already have been paid, while others, haven’t paid a dime.
This is where your business savings and tax deductions come in!
Take a gander at the top tax deductions you don’t want to forget about and evaluate your budget, business plan and needs before filing.
How do I keep track of these?
It is best to keep a running record book of the entire year with all receipts and notes referencing the event, client, or expense. Use the following deductible categories as a way to organize and divide up your expenses into a manageable mess of receipts, instead of an unmanageable one. Seriously, get a structure and workflow to keep up with all expenses. Every penny spent that is deductible is potentially a penny saved.
What is deductible?
Keep in mind that not all expenses for a business are deductible. Not every expense within one of the following categories may be deductible either. The goal for this list is to provide a structure for organization, a guide for end of year purchases, and give a bird’s eye view of what is to come with filing your taxes. Always, always, always consult a CPA or tax attorney for guidance.
Whether Nikon, Canon, or Sony, the end of the year is full of sales and deductible expenses for equipment used in your business. This can include cameras, computers and lenses. Word to the wise: Don’t buy just to buy for a deduction. Buy because you have saved for the item (or will be instituting savings to pay it off in your cost of doing business) and need the item. Equipment may also be subject to depreciation deductions.
See: What’s In My Bag?
Education directly related to the maintenance or improving of skills required to run the business. Note: Education that qualifies you for a new job is NOT deductible. It must be for an existing business. Education can include online workshops like BizRevamp, in-person conventions, seminars, trade shows, etc. Maybe you need some help on designing albums or tutorials for Photoshop; create a running list of educational resources you’d like to tap into and jump on them after making an educated decision.
3. Automobile & Mileage Expenses
There are a few things under this deduction that all small business owners should be mindful of: mileage, expense of vehicle used in business, tolls, and parking costs.
Tip: To keep track of mileage for each session either write it down immediately, or reset odometer and let it run until done with a session – then take a picture and email it to yourself.
4. Software Purchases
Post-processing (Lightroom 4, Photoshop CS, Photoshop Elements) and accounting (Quickbooks, Quicken) software are deductible as long as purchased and used in the same year. Software is typically written off for multiple years as it will service the business for multiple years. However, Section 179 of the tax code allows for small business owners to fully deduct off-the-shelf software in the year it is purchased.
5. Marketing Expenses
Expenses incurred directly to advertising and marketing are deductible for your business. This includes business cards, magazine advertisements, and digital marketing tools.
6. Legal/Professional Fees and Association Dues
Fees, business books, and other related expenses to hiring and using lawyers, consultants, and tax professionals may be deducted for the current year. Also, dues paid to a professional association related to the business are deductible.
Taxes that your business incurs during operation may be deductible. These include sales tax on items purchased for daily operations of the business (as part of cost of the item itself), employment taxes, and real estate taxes. This is one area I strongly recommend the help of a CPA or tax attorney.
8. Charitable Donations
Donations made to a charitable entity may be deductible. Also, and this goes hand-in-hand with marketing costs, costs that provide goodwill to the community (such as sponsoring a sporting or organizational event) are deductible, as long as it is easily seen that your company is the sponsor.
9. Home Office & Office Supplies
The space utilized in the home and percentage of phone, internet, and utility usage to run the business are deductible.
10. Business Fees
ATM fees, credit card fees, and bank charges for a business account are potentially deductible.
Recommended Purchases for Your Photography Business
Here are some of the top recommended purchases that can be used as deductions. The key is to be smart and not simply to reduce income tax liability. Make sure all of these purchases fit into your business plan for success.
- Accounting Software
- Online contracts
- Marketing Materials
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