Business Tax Write-Offs

Understanding many of the write-off opportunities that can be applied to your PnL each year is a financial advantage. Depending on your business classification—Sole Proprietor, LLC, S Corp, or C Corp— different write-offs may or may not be applicable.

Let’s dive deeper into 4 write-offs that can be used where applicable!

1 | first year start up costs

Starting up a business is exciting but can also be expensive. The good news is that you may have the opportunity to take tax deductions to help alleviate some of that up-front financial burden Small Business Owners face. Here are some of the most common startup expenses that might be eligible and good to take advantage of:

• Organizational Costs—Costs associated with setting us legal structure, such as legal’, such as legal fees for incorporating your business, obtaining necessary licenses and permits, and fees for registering your business name.

• Research & Development—Expenses related to researching and developing your product or service, including costs for prototypes, market research, and testing.

• Equipment and Supplies—The costs of purchasing necessary equipment and supplies for your business, such as computers, furniture, software, and office supplies.

• Marketing and Advertising—Expenses for advertising and promoting your business, including costs for website development, printed marketing materials, and online advertising.

• Professional Services— Fees paid to consultants, accountants, lawyers, and other professionals for services related to starting and operating your business.

• Employee Expenses— If you hire employees or contractors, you can deduct their wages, salaries, benefits, and other related expenses.

• Utilities and Rent—Payments for utilities, rent, and other expenses related to leasing office space or operating your business from a home office.

• Interest Expenses—If you borrowed money to finance your startup, you may be able to deduct the interest paid on business loans or credit cards.

2 | YOUR VEHICLE

If you are a Business Owner and you plan to drive a vehicle for business purposes, using the vehicle 50% of the time or more for business, you should be able to elect for a vehicle tax deduction. This includes travel between different work locations, visiting clients/customers, attending business meetings, and other work-related activities. When deciding what type of vehicle tax deduction to take, there are two options: the Actual Expense Method or Standard Mileage.

• Actual Expense Method: With the Actual Expense Method, you can deduct the actual costs of operating the vehicle – gas, car insurance, registration fees, maintenance/repairs, car washes, etc. In addition, you can deduct up to $20,500 of the purchase price in 2024 if a vehicle weighs less than 6,000 lbs, OR 60% of the purchase price if the car weighs over 6,000 lbs (with no max limitation).

  • Example: If a Business Owner were to purchase a BMW X5 for $80,000, they would be able to deduct $48,000 from their taxes that year ON TOP of vehicle operating expenses – gas, maintenance, etc.

• Standard Mileage Rate Method - With the Standard Mileage Rate method, a Business Owner can deduct $0.67 per mile driven for business purposes. This is a simple and easy method to use if you don’t love to track every expense and instead would prefer just to use mileage. Apps such as MilesIQ will automatically log your driving routes – distance, dates, etc. and can be used to categorize your accounting needs. If you drive a vehicle that gets great gas mileage and doesn’t require much annual maintenance, deducting mileage can sometimes benefit Business Owners more than using the Actual Expense Method.

  • Example: As a Business Owner, you drive 10,000 business miles per year x $0.67 = $6,700 tax deduction

3 | MEALS

If you are a Business Owner who tends to wine and dine clients, holds business meetings at a coffee shop, team lunch gatherings, or travels for work, and therefore must consume food/drink outside of your home…you’re in luck! Meals are another great tax write off to partner with your CPA on. Here’s what you need to know!

• Ordinary Use—The meal expense should be considered ordinary for your business. If it is a common practice in your industry that correlates with your business's operations, then food, drinks, etc., expenses can be leveraged as a tax write-off.

• Limitations—Now, I wish I could tell you that meals are a 100% tax write-off, but unfortunately, that just isn’t the case typically. The IRS generally allows for a 50% deduction for meals generated for business purposes. There are, however, one-off situations in which you may be able to deduct a larger percentage, so be sure to check with your CPA.

• Documentation—Last but not least, you will want to ensure you keep a paper trail as usual. Filing away copies of receipts and/or invoices is imperative when taking a business deduction, such as meal expenses. Be sure to notate the business purpose and attendees for any meal expense you plan to claim as a tax write-off.

4 | business travel

If you work in an industry where you need to travel for business purposes, you’re in luck! Traveling can be an expensive line item on your PnL (profit and loss statement), but the bright side is…it can be a tax write-off to help you reduce your owe to the IRS. Here’s how!

• Ordinary Use—Business travel should be considered ordinary for your business, and there should be a clear business purpose for the expense. If it is a common practice in your industry to travel for client meetings, attend conferences or tradeshows, or visit job sites and is necessary for

• Eligibility— Airfare, lodging, meals, car rentals, public transportation costs, tips, and other incidentals directly related to the business trip can be eligible for logging as a travel expense. You can generally only deduct the expenses that are directly related to the business portion of your trip and not any personal expenses. Example: If you travel for a 3-day conference but decide to extend your trip for a week, only the expenses directly related to the three-day conference should be taken into account as a write-off.

• Duration—It is suggested that you connect with your CPA to discuss any questions regarding your duration of Business Travel. While there aren’t any rules typically on the maximum amount of time you can travel for a business trip, the expenses you will incur should be monitored because not all personal activities may be fully deductible.

• Documentation—Be sure to keep records of all business travel expenses, including receipts, invoices, ticket sales, etc. Many times, business travel payments are made over a few months, so it is highly recommended that you organize all documentation in one spot for your reference. In addition, if your business travel is international, there may be additional taxes, currency conversion, and other specific documents you will want to make note of for further conversations with your CPA.

My Business Owner Tax Playbook will empower you to become an expert in taxation! You will be better equipped to have more robust conversations with your CPA and see massive improvements to your bottom line.

All the best!

Jen

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