By Thomas Arrison, Certified Public Accountant
Tax Deductions
The reason you need a bookkeeping system is so that you can deduct all the expenses possible to minimize the taxes you will be paying.
There are a couple of expenses that you will not collect in your bookkeeping system.
Automobile expense. You have two choices in calculating your deduction for your automobile. Under either choice you need to keep a log on your business miles and know the total miles you drive your car during the year.
One way is to record every expense, (gas, insurance, repairs etc.) you incur using your automobile. Once you know the total cost you multiply it by your business-use percentage. (Business-use percentage is your business miles divided by your total miles.) Alternately, you use the IRS automobile mileage rate (for 2009 the IRS mileage rate is $0.55 per mile) times the business miles. The vast majority of my clients use the IRS standard mileage rate. It’s simpler to work with.
Deduction for a home office. To deduct the cost to maintain an office in your home, you must use the area exclusively for business. Thus you cannot deduct the expense if you work at your kitchen table. You are allowed to deduct the business-use percentage of all the expenses to run the house. This would include mortgage interest, real estate taxes, utilities, heat, insurance, and general repairs. You cannot deduct repairs to the non-business use portion of the house, like your kitchen. As this is a complex deduction, it would benefit you to hire a tax professional to help you figure it out.
Here is a partial list of the other expense categories:
- Advertising
- Insurance
- Interest
- Professional Fees
- Office Expenses
- Rent
- Repairs
- Supplies
- Taxes
- Licenses
- Travel
- Meals
- Entertainment
- Utilities
- Telephone
- Bank Charges
- Dues
- Subscriptions
- Computers
- Cleaning
About Thomas Arrison
Thomas has been a CPA for over 30 years. Since 1992 he has provided individual and business tax and accounting services at Arrison & Olden, PC in Littleton, MA. He also has his own blog, Thom’s Tax Talk, a compendium of tax tidbits and information.
