You're a small business owner, and sometimes as a creative you find it difficult to manage some of the more “business” aspects of your business.
You think you've finally got a system down with some of these tedious tasks, ahem, like taxes, and then you hear about just one more thing you should be doing.
Does the “should-do” list ever end?
How can you honestly remember to keep track of everything?
Well it's time you sat down to really focus on taxes because it's extremely important to keep your business legitimate.
So it's time to dive right in about to talk about taxes, so now is a good time to go grab another cup of coffee.
Taxes can be, at various times, confusing, intimidating, disappointing (when you owe a bunch), or exhilarating (when you get that surprise refund, holla!).
Like most things though, taxes become significantly less confusing and intimidating the more you know.
So, we’re going to tell you about 3 deductions that not everyone knows about, but that can really help when Uncle Sam comes around.
1. Home Office Deduction
If you’re self-employed, there’s a pretty good chance you have a home office.
A home office is any area of your home that is devoted 100% to your business.
You can deduct everything related to work for that space.
The way this is usually calculated is as a percentage of the total square footage of your home.
For example, if you have a 1,000 sq. ft. apartment, and you have space for work that is 100 sq. ft., then you can deduct 10% of many of the expenses of owning your home.
Like rent or mortgage interest: you can also deduct 10% of your utilities, internet bill, etc.
2. Health Insurance Deduction
This is for self-employed people (and certain people with an S-Corp).
If you are self-employed, you are allowed to deduct the amount you pay for health insurance for yourself, your spouse, and your dependents!
3. Meals & Entertainment Deduction
This is one that Kyrsten and I forget all the time.
Since we work together and we’re always talking about business, most of our meals out could theoretically qualify as business meals, but even excluding those, we regularly find a babysitter so that we can get out of the house to a restaurant, bar, or coffee shop and have a real, deep discussion about business.
The rule is pretty lenient.
To get a business deduction, there must be a substantial discussion of business directly before, during, or directly after the meal.
You only get 50% of this one, but that can still be a substantial amount for self-employed foodies!
4. Anything else to help further your business!
A lot of people tend to be hesitant to take deductions that they’re entitled to, especially if the purchase is one that they would have made anyway.
But, it doesn’t matter if you made the purchase anyway.
What matters is whether you bought the thing for your business.
For example: photographers can deduct anything that they use for props for photoshoots or any sort of cleaning supplies for their cameras.
For crafters: make sure you’re deducting any shipping labels, ink for your printer (if you print invoices or your own shipping labels), pens, etc.
One thing that doesn’t apply to this section is clothing.
Unfortunately you can’t deduct work clothes (womp womp).
If you’re self-employed, and you’re not taking these deductions, you probably should be ;).
As for the question of how to go about taking them, if you have decent software to do your tax return, it should be able to calculate everything correctly.
Otherwise, we always advise our clients to talk to an accountant in their own state, because even though these are all federal deductions, some of them might be applicable if your state has an income tax as well.
If you already have an accountant doing your taxes, mention these deductions to them and they should definitely be able to either get them for you or explain why you aren’t getting them already.
Kelly and Kyrsten Sherwood make up the two halves of Launch Brand Grow – a Branding and Web design firm, specializing in Creative and Small Business Brand Design and Strategy.
They’re in the process of developing and launching the first 100% online school for Entrepreneurs filled with courses from Brainstorming Your Ideal Business to Conquering SEO to Accounting, Contracts, Marketing and more.
The Entrepreneurial School is scheduled to launch mid-2017!
Make sure you’re first to know about it by signing up at www.ckc.io/join!