Have your own business? Make sure you’re taking advantage of all the deductions you’re entitled to… folks miss out on deductions simply because they either don’t know about them or it’s too much work to locate all the receipts and figure out where to put them in TurboTax. Some common mistakes:
- Not taking a deduction for health insurance you pay out of pocket for you and your family… or taking the deduction as medical expenses on Schedule A instead of as self-employed health insurance right on the front page of Form 1040. Enter this during the interview for your Schedule C… and don’t enter them again in the Medical Expenses area!
- Not taking auto expense deduction: nearly everyone incurs some travel time as part of their business efforts … driving from one job to another, running to the store for supplies or visiting customers. At the very least, take the standard mileage deduction (our Schedule C interview will ask you for the mileage numbers… at a minimum, enter your business miles and total miles). If you have records for your gas, repairs, insurance, and all that, have TurboTax figure out which deduction’s bigger: mileage or actual expenses. And DON’T forget to depreciate your car! This is available only if you take the actual expenses, but it helps! If you lease your car, enter your lease payments … the business part of those is deductible as well.
- Not taking a deduction for all those meals at which business is discussed or transacted … granted, you get only 1/2 of your expenses for this, but make sure you include those meals. There may be more than you think!
- Forgetting to take the home office deduction, where you can deduct part of your utilities, internet provider fees, homeowners insurance, homeowners association fees, landscaping, etc. … whatever portion relates to maintaining the percentage of space used for your office. Home repairs should also be considered here. Not deducting contract or casual labor you pay for … a bookkeeper who comes in to do your books, consultants, etc. Even cash payments can be deducted… just make sure you keep records as to whom paid, when and for what.
- Not setting up a self-employed pension plan for your business if it’s consistently profitable… you can deduct your contributions up to 15% of your net income from the business. It’s smart tax planning for your retirement AND it’s a great deduction! Your deduction goes right on the front page of Form 1040!