Women-owned businesses are a force—they are projected to account for 39% of all US businesses by the end of 2017. It’s crucial you understand which tax deductions you can claim. Though April 18, 2018, is nearly a year away, don’t get complacent—start preparing for next year to be as organized as possible.
Taxes are inevitable, but there are steps you can take to reduce your taxable income. Here are four useful tax deductions you should know about to increase your profit in 2017.
Utilities are often overlooked, yet important, deductions for business owners to be aware of. Utility costs can include expenses such as electricity, telephone, and internet services. Even cable TV services can be deducted if they are used strictly for business purposes, such as for customer entertainment or watching certain channels that tie directly to your business. Just be sure that the utilities you deduct can be directly attributed to your business, either as common or necessary expenses.
If you have a home business, you can calculate utility expenses by multiplying your yearly utility bills by the percentage used for your business. So, for example, if 50% of your internet use is for business purposes, and your yearly bill is $1,200, you multiply $1,200 by .50 to find that the deductible amount is $600.
- Health Insurance Premiums
Medical expenses can be tricky for many taxpayers to deduct. Normally, you are required to itemize them, and you can receive a deduction only if your medical expenses exceed A big exception is made to self-employed individuals, however.
Anyone who is self-employed can deduct their health insurance premiums whether or not they are itemized or meet that 10% minimum. This is an important deduction for women who rely on health insurance for a range of benefits including annual well-woman visits, breast cancer mammography screenings, and more. Self-employed persons can deduct health insurance premiums not only for themselves, but for their spouse and dependents. However, if your spouse is eligible for health insurance through their job, or if you have a job on the side that gives you access to an employer-sponsored health insurance program, you won’t qualify for this deduction.
- Business Travel
It’s true: you can deduct travel expenses as long as you are traveling to do business in another city or country, and as long as the travel is considered temporary, meaning it is . You cannot expect to deduct expenses when conducting business where you live, except for meals and mileage. Furthermore, you cannot deduct any expenses incurred by your family members if they decide to join you on a business trip.
Interestingly enough, women have been found to plan further in advance than male counterparts and better prepare for the stress of business travel. As such, travel expenses for women business owners may not be quite as high as for men, but are still important to record for tax deduction purposes. When traveling for business, you can deduct expenses such as transportation—including tolls and parking fees—accommodation, and meals. According to the IRS, when buying meals, bear in mind that you can only deduct 50% of that cost. However, if you have a side job and your employer reimburses you for their meal, then you cannot deduct the meal as an expense.
- Charitable Donations
Unfortunately, only businesses classified as C Corporations can qualify for charitable donation deductions. However, it is still important to consider as your business continues to grow. If you’re a sole proprietor who wants to make a charitable donation without receiving goods or services in return, this donation would be listed as an itemized deduction, which only provides a tax benefit if you can itemize your deductions.
However, if you as a sole proprietor donate money to a charity and receive a mention in the charity’s newsletter, this is no longer counted as a donation. Instead, it is seen as an advertising or marketing expense, so it can then be deducted as a normal business expense.
Don’t overlook these important deductions, as they could save your woman-owned business money that could then be reinvested back into growing your business. Most importantly, keep a clear record of your expenses and receipts, both offline and online. You never know if you will receive an audit by the IRS, and you will want to be prepared to justify your business expenses.