In just under 5 minutes, you can learn these tax deductions and start applying them to your business immediately, no if or but about it immediately. Let’s go!
First, thank you to the anonymous reader for answering this question.
He wanted to know some super easy tax tips that he could apply right away in under 5 minutes..he was particular about this requirement.
So we dedicated this video to finding precisely; the 3 most straightforward explained tax deductions anyone could apply to their business at any point this year.
Business Mileage Calculation
Here you go #1 is the Simplified method of the business mileage calculation. This is very easy to do and does not require much accounting skills. You multiply the number of miles you travel for business purposes by a set rate for the IRS, which I will give you. IN 2021 that rate is 56 cents….So you would multiply the percentage by the number of business miles you have.
Now here’s what counts as business miles essential…but here, what does not matter is commuting. Commuting from your home to your place of work will not count as a tax-deductible expense. But what does matter is the following:
Travelling To Meet Clients
- Travelling to run errands for your business, such as picking up supplies, mailing packages at the post office
- Travelling for conferences, events, or any business-related travel with a potential for a revenue-generating activity will all count toward this.
Remember, logging all your miles on time is essential in case you get audited.
Now that we got this out of the way, let’s do a quick example.
Sarah travels weekly to visit her consulting client at the business location.
Each month, she travels about 500 miles to all her clients. In 12 months, that is 6,000 miles of business travel.
So, Sarah can take a 6,000 x .56= 3,360 dollar deduction for her taxes this year!
Pretty awesome right?
Home Office Deduction
In #2, we have the simplified option for the home office deduction. The home office deduction allows you to take a deduction for working from home when you are your boss – this would not apply if you are an employee of a company working from home.
Only if you are self-employed.
So what is a home-based business deduction?
It’s a rule the IRS has which allows you to take a deduction for the business use of your home.
As I mentioned, it is only for business owners or independent contractors, and you can qualify if you rent or own your home…
So these are the two qualifications you must meet to qualify for the deduction.
One is this must become your primary place of business. Meaning if you choose to take this, you cannot keep another office somewhere else where you work out of.
If you use a temporary work solution, it is beautiful.
For most com owners, that is not too hard to meet. The 2nd is the space must be regularly and exclusively used for your business. So it has to be a room dedicated to business and not split with personal activity so that a living space would be wrong. If your home is your only business location, it’s easy to show that it is your principal place of business.
But you must consider two factors if you work at home and in an office. These are the two methods of home deduction: one is simplified, and one is actual expense deduction. If your home office is 300 square feet or less and you take the simplified assumption, the IRS gives you a conclusion of $5 per square foot of your home used for business, up to a maximum of $1,500 for a 300-square-foot space.
If you haven’t been keeping good records of what else you’re using in your home for your business, this is a great way to get at least some deduction for working from home.
Here’s a quick example: Brad operates his shirt brand from his home office. This is his only office, used just for his business room. The room is about 200 square feet so Brad can take a 200 x 5= $1000 deduction just like that, with 2 min of math right then.
Startup Cost Deduction
In #3, We have the startup cost deduction. Startup cost deduction is an IRS ruling that allows you to take a tax deduction before you even start operating your business! Yes, you can take up to a $5,000 tax deduction for these categories:
- Creating a Trade or Business
- Product Research (Droppoint, Adpy, etc.)
- Preparing the Business to Open
- Travel overseas to talk to suppliers, pay Consultant fees (paying for the mentorship)
- Organizational Cost Legal fees, accounting fees, state filings, incorporation, insurance
So if this is your first year operating your business, make sure you take advantage of this, and if you haven’t started your business yet, then make sure you gather your receipts for all of these categories so that when you do start, you know you already have 5,000 of tax deduction waiting for you during tax time, how sweet is that.
As you can see, all 3 tips are straightforward for non-accountants. The disclaimer must be given that these are not the tips I would advise our client on as they may not be what gives the most deduction, but for someone just starting and looking to learn how to take advantage of the tax code, this is a great start! And you can do this by yourself in under 5-10 times, as they are all simple deductions.
Ensure you don’t miss out and take all 3 of these deductions this year when you file your taxes.