Tax Writeoffs: Make Your Taxes Useful!

Posted in Business, Real World

Utilizing tax write-offs is a great way to essentially make ’something out of nothing’. For business owners and self-employed individuals, which includes owners of Internet-based companies/websites, tax write-offs are the bread and butter of making the most of your hard-earned money. With the US tax season right around the corner, it’s about time you start compiling a list of things to write-off . Whether you use TurboTax software or consult with an H&R Block representative in order to get your taxes done, there are many legitamite ways of pushing your tax dollars to their limits. Though write-off eligibility could vary from person to person, and sometimes depends on which tax bracket you’re a part of, there’s always a way to get some reduction on your taxes. After all, Uncle Sam doesn’t need all your money.

1. Write off a room in your house/apartment - if your place of residence has multiple rooms, dedicate one of the rooms to solely business activities. Doesn’t have to be the master bedroom, even something a little bigger than a walk-in closet will do. You can write off the value of the room (which, when appraised, may be much higher than you might think) as a business expense, and save a few hundred (or maybe even thousand) dollars.

2. Write off all electronic devices that you need - heck, buy yourself a new top-of-the-line computer every year. Want that new 22″ LCD monitor? Buy it! How about a new PDA or iPhone? Buy it! As long as you can prove to the IRS that at least a portion of it is used for business work, you can write off a respective portion of your taxes (although you may need to capitalize it and depreciate it over time, but essentially, it’s a write-off).

3. Write off a new car - depending on where you live, you could buy or lease a new car and save a chunk of money. Though this mainly applies to people who have more than $30K a year in taxes, you could, using a tax loophole, buy a new luxury SUV that weighs over 6,000 pounds and write-off $30K of its value in the first year (might want to check with your H&R Block adviser on this one). Thinking about leasing? Well you could lease a new 2008 Mercedes C-Class and write-off a major portion of the lease if the car is ‘mainly used as a business car’. Might want to keep the mileage low though, for auditing reasons (wink).

4. Write off gas - use your car to goto Kinkos and make copies of advertising contracts? How about driving to BestBuy to buy that new computer you’re planning on writing off? Well yes, you can write off all the gas that it takes you to get from your home to your destination and back, as long as the destination has something to do with your company’s interest.

5. Write off the food you eat - taking a trip to StarBucks to talk to a prospective client or business partner? Write-off the Grande White Chocolate Mocha as a business expense. Taking fellow staff to dinner at a up-scale restaurant? Write it off (all though you can only write off 50% max of business food expenses)!

6. Write off your server(s) - obviously if you are running an Internet-based company, you’re going to need to have some sort of hosting/servers. Make sure to mention that as a business expense, I mean, what else could you be using a dedicated server for?

7. Write off your donations - care about a particular cause? Want to look philanthropic without losing your shirt? When donating to various causes, whether it be the Ronald McDonald House foundation or the Salvation Army, feel free to write-off all the donation amount from your taxes. Kill two birds with one stone (or save two birds by donating to the PETA)!

And finally, a word for the wise: save ALL receipts and keep detailed logs of all purchases you made that relate to your business. IRS will screw you if you don’t have proof of purchase/usage. And this list is by no means complete; there are many, many more ways of making use of your tax dollars more efficiently if you own a company, just do some more research (or hire the tax guy, and make sure he knows you want to get the write-offs you deserve)!