1. Deduction for Local Travel
Generally speaking, any travel that you do to meet with clients is deductible. If you’re in a business where you meet with most clients face-to-face, this one is absolutely essential. You have two options: You can either deduct the actual costs of the travel (by saving gas receipts and so on), or you can take the standard mileage deduction. (The standard mileage deduction gives you a deduction of 48.5¢ for each mile driven for business.) If you opt for this method, you won’t have to save receipts, only keep a log of your miles driven for business purposes.
2. Deduction for Meals with Clients
For the most part, if you take a client or prospective client out to dinner, and the primary purpose of the meal was to discuss business, you get a deduction for 50% of the cost of the meal. Why only 50%? The IRS knows that even if you aren’t taking clients out, you’re still going to have to eat, so this is their way of not letting you deduct your half.
3. Deduction for Retirement Savings
This one is a no-brainer. Assuming you’re saving for retirement, why not do it in a tax-advantaged way? Figure out if a SEP IRA or a SIMPLE IRA is right for you, and then go open one up. (You get the same investment options as with a regular IRA, and your contribution limits are far higher.)
4. Deduction for Equipment (Computers/PDAs/etc)
If you buy equipment that you use exclusively for business, you can deduct the cost of the equipment (by using what’s known as a Section 179 election).
If you use the equipment between 51% and 99% of the time for business, you can deduct the business-use portion of the cost. (Used 60% of the time for business? Deduct 60% of the cost.)
If you use the equipment less than half the time for business, things get a little more tricky, as it now depends on what type of equipment we’re talking about. But regardless, you’re still entitled to at least some deduction.
5. Home Office Deduction
Lots of people don’t bother with this one because they aren’t sure if they qualify for it, or because they simply don’t want to go through the hassle of filling out the form (Form 8829). Big mistake. This deduction—if you qualify for it—is huge. You get to deduct a portion of the following costs for your home:
- Cleaning supplies or services
- Utility bills
…And over the last several years, qualifying for the Home Office Deduction has been made much easier. As long as you have a portion of your home that you use exclusively and regularly for business, you qualify.