Business Expense Deductions You Should Be Tracking Now Before Year-End

You blinked, and half the year is gone. The next six months come on fast, and every week that passes without tracking your business expenses is money left on the table come tax season.

Most business owners think of deductions as a December problem, something to figure out right before tax time rolls around. But waiting until the last minute like that almost guarantees you'll miss expenses that can knock quite a bit off your tax liability.

In this blog, we're breaking down the key expense categories you should be actively logging today so you're not scrambling or missing deductions when it matters most.

What Qualifies as a Business Expense Deduction?

For an expense to qualify as a genuine business deduction, it must pass a three-part IRS test. It must be:

• Ordinary, common to your industry

• Necessary, helpful for operating your business

• Reasonable, not anything extravagant 

Here’s a comparison:

• It IS a qualified business expense if you buy a laminating machine for your printing business.

• It IS NOT a qualified business expense if you take a family trip to Disney World under the claim of “employee bonding”.

Must-Track Business Expense Deduction Categories 

The IRS requires you to provide a receipt for any expense over $75. 

Especially if your expenses meet that threshold, and even if they don't, here are the categories you should be tracking to avoid the need for further explanations next year.

Vehicle & Mileage

If you use your vehicle for business purposes, the IRS allows you to claim 70 cents per mile as a deduction, with the standard mileage rate tending to increase each year.

To claim this deduction, you need a detailed log of the:

• Dates you used the vehicle

• Destination

• Number of miles driven

• Business purpose for the trip

Important to Note: Commuting to work does not count as a business expense, so you won’t be able to claim any mileage spent getting to or from your job.

Home Office Expenses

If you work from home and have a space that is used exclusively and regularly as your principal place of business, you can typically deduct a percentage of real home costs.

The IRS provides a simplified method, $5 per square foot up to 300 feet, or an actual method for determining the expense.

Important to Note: The IRS changed the rules so that only business owners, not employees, can claim home office deductions.

Business Meals + Entertainment

You can generally deduct 50% of the costs of meals with clients or those you pay for while traveling for business. You can also deduct the cost of entertaining guests as part of your business expenses, so long as they meet certain requirements.

Don't just hold onto the receipts from these purchases. Keep records of whom you met with and the business purpose, on top of the amount you spent.

Equipment + Technology

Section 179 allows you to deduct the full purchase price of qualifying equipment and software in the year it's placed in service. The IRS provides guidance for how much you can deduct based on the applicable tax year.

Pro Tip: Don't wait until December to make these purchases. The technology needs to be in-service by the end of the year to qualify for the deduction.

Payroll, Contractors, and Benefits

The wages and salaries you pay employees and independent contractors are fully deductible from your business expenses, as are health insurance premiums and retirement contributions.

However, you must remember to file Form 1099-NEC as an additional step if you pay a contractor $600 or more.

Advertising + Marketing

Expenses related to promoting your business are deductible as ordinary and necessary expenses. 

This can include:

• Digital advertising

• Social media management

• Newspaper ads

• Direct mailers

• Website hosting expenses

• Conference or event appearances

Professional Fees + Subscriptions

If you pay for professional services, such as accounting, legal, or consulting help, you can deduct those expenses. This category also includes professional organizations and software subscriptions that you use for business.

Important to Note: Unless they meet very specific criteria related to your small business, you cannot deduct social or athletic club memberships as a qualified expense.

Don’t Wait Until December. Talk to AVM DeMars Now.

Notice how many different business expenses you have to keep track of. You don’t want to miss a single one—which is why you need a partner helping you out year-round.

The team at AVM DeMars works with businesses across Long Island, New York, New Jersey, and Connecticut to make sure every legitimate deduction is documented, defensible, and working in your favor.

Let’s work together to make sure you don’t leave a single dollar on the table. Contact our team to start getting ahead of your tax deductions.