For many self-employed folks, March and April are dreaded months because they bring that dreaded task – taxes. For me, I have a happy March and April because I am always on the lookout for ways to legally minimize my taxes. I feel excitement and pride whenever I discover a new deduction. Not that I want to cheat the government, but I do want to pay as little taxes as possible. Did you know that we actually have a legal right and responsibility to ensure that we are not overpaying our taxes? It’s true!
So I’d like to share with you some of the ways I’ve discovered to keep my taxes to a minimum. These tips aren’t in any specific order, and some may not apply to your specific situation. As always, if you have specific questions or concerns, be sure to ask your accountant or tax preparer.
Automobile expenses are often overlooked and under-reported. Did you know that each time you take a trip to your local office supply store, bookstore, client site, networking location, airport, or other business-related errand, that you are on a business trip? Even if you happen to stop at the grocery store and dry-cleaner along the way, all those miles count as business miles. It really pays to keep track of them! I’ve been able to consistently write off 70-90% of my auto-related expenses each year by taking just a few seconds in the car to log the business miles. If you don’t know the exact number of miles you traveled within one trip, check it out on MapQuest or similar Internet site.
Make sure to keep a written log of the mileage.You can deduct either a portion of your actual annual expenses (gas, oil changes, maintenance, insurance, new tires, car washes, etc.) with the portion being determined by the number of annual business miles you drive divided by the annual total number of miles you drive. Or, you can deduct a certain amount per business mile. Check the IRS website (www.irs.gov) to learn the current deductible amount. The miles can really add up!
Training expenses: Any type of training you take to help you maintain or improve yourself as a coach and/or as a business owner is deductible. Included in this are any conferences, seminars, workshops, and tradeshows that you attend that are related in some way to either coaching or business. Do remember that as you become a more developed person, you also become a better coach. What activities do you do that help you develop as a person? These activities may bring you additional deductions that you wouldn’t normally consider.
Your own coach. If the coaching you receive includes discussion/coaching about your business, and/or you as a coach, it is a legitimate business deduction. Do make sure to get receipts for your payments.
Any books or periodicals or subscriptions (including online) from which you get coaching or business information. This can include magazines such as O or Health that have a portion dedicated to self-development topics, or can include your local newspaper if there are articles or features about being a small business owner in your region.
Your retirement savings. Any deposits you put into a retirement account (SEP-IRA or Keogh or similar) are deductible. Remember that you have until April 15 to deposit funds that will count toward your previous year’s taxes! This deduction not only saves you taxes, it also helps build your retirement funds. Even if you only save $250 a year towards retirement, it’s a hugely beneficial savings!
Business gifts, for clients, potential clients and colleagues. There is an annual limit of $25 per recipient. Keep receipts for those holiday and birthday gifts!
You can now deduct 100% of your medical, dental, and qualified long-term careinsurance. However, this deduction is not available if you are on your spouse/partner’s plan through their employer. But if you have to arrange for your own personal insurance coverage, it’s now fully deductible! (Any type of business insurance is of course deductible too.)
Do you have a credit card that you use exclusively for business? If so, any annual fee or interest fees are deductible as a business expense. This holds true for any fees associated with a bank account that you use solely for your business.
Do you mail out your invoices or notices? Don’t forget to deduct the cost for the materials(paper, ink, toner, envelopes, etc.) as well as the postage. In fact, all of the office supplies used in your business are deductible.
You might be eligible for a home office deduction if there is a space in your home or apartment that you use regularly and exclusively for business. This deduction would allow you to write off a portion of your utilities, rent, mortgage, house insurance and upkeep. But the deduction also has some implications for when you sell/leave your home and can get a little tricky, so make sure to read up on the implications.
Charges for online services such as email, website hosting, and your internet service provider.
Bought a new PC or Palm Pilot or printer or phone system or cell phone or otherelectronic equipment or gadget lately? If so, estimate the percent of time it is used for business purposes. If it’s over 50%, you can write off that portion of the cost and any upkeep.
Speaking of phones. You cannot write off the basic monthly charge for your home phone, since the IRS assumes that you would have a home phone even if you did not have a business (an accurate assumption I think). However, you can write off any business related calls you make from your home phone. Or, if you have a cell phone that you use primarily for business, you can write off that expense. Or, if you have a dedicated business line, you can write off that entire expense.
A hint to locating what other deductions might exist in your world is to ask yourself “What would I NOT do if I didn’t have my business?” The expenses for those things are probably deductions (though, unfortunately, child care is still not considered a business expense).
Please remember to collect receipts for your deductions. You are required to have receipts or some form of formal written documentation for any expense of $25 or over, and you may want to get into the habit of saving all business related receipts, regardless of the dollar amount.
What new deductions can you discover in your world? I’d love to hear about them, so please send me an email with your ideas and questions!
Wishing you a very happy March and April, along with many newly discovered deductions!
Dorcas Kelley CPCC CMC PCC
Helping you make the leap from ‘coaching skills’ to ‘coaching profession’ firstname.lastname@example.org